2016 has been an interesting year so far in terms of politics and domestic and world events. If you’ve been wondering how issues like the presidential election and rising health insurance costs have affected the small business transaction market, Calder Capital is pleased to report that the news is good.
Not only have our firm’s closings been at record highs, but BizBuySell recently posted 2016 statistics revealing that the total number of sales of small businesses is up, not just from first quarter numbers, but also compared to second quarter numbers from 2015. The predictions earlier in the year were for a healthy market in 2016:
The market itself is stabilizing, and more normal supply and demand forces are are now at work. The higher sale prices owners were able to demand in 2015 indicate that a lower number of sales is not something an owner with a solid business offering should be too concerned about.
At the beginning of the third quarter, it looks like those predictions have come true and the market for businesses has not been negatively affected by outside events or the economy.
The total number of closed transactions reported in the first half of 2016 is 3,775, compared to the 3,743 reported in the first two quarters of 2015. Median revenue of those sold businesses was $441,331, slightly down from last year, but the median cash flow at $102,995, was slightly up. The median sale price for a small business stands at $199,000, almost exactly the same as in 2015. The stability of the market over time in terms of all of these financials indicates a healthy market with a regular flow of both buyers and sellers. Over time the median asking price for small businesses has risen, however, and the predictable outcome of that has been longer sales cycles or time on the market.
How long is it taking right now for a small business to sell? The median second-quarter number was 178 days on the market, or about six months. Many of the businesses that sold at the end of Q2 were ones put on the market after the new year, as it’s common for owners to wait for a new fiscal year before initiating large changes.
It generally takes up to six months to prepare a business for sale in order to maximize its desirability on the market, but this is not the case for every small business. Calder has experience working with businesses at any stage in this process, so if you are ready to sell now or only beginning the process of planning for an eventual sale, please contact us so we can advise you on the best steps to take to create both a smooth sale process and attain the maximum value for your work and investment.