BizBuySell.com Reports 4Q Business-for-Sale Transactions Rose 3%
SAN FRANCISCO -- BizBuySell.com, one of the largest Internet business for sale marketplaces, recently released its fourth quarter BizBuysell.com Insight Report. The report stated that the number of closed business-for-sale transactions in the U.S., according to business brokers, rose by 3 percent in 2010. And transactions completed in the fourth quarter were up 11 percent versus the 2009 fourth quarter.
"Spurred on by a strong showing in the fourth quarter, the business-for-sale market showed some promising signs of recovery heading into the New Year," Mike Handelsman, group general manager, BizBuySell.com and BizQuest.com said in a released statement. "In 2010, we saw more deals getting done. One of the key drivers for that growth was that business sellers were more realistic about their business valuations."
However, there was an expense to pay for the increased business-for-sale market -- the decline in business valuations, and according to Handelsman this suggests a continued softness in the economy and constrained capital access which reduced the number of qualified buyers. According to the Web site, the median closed-transaction sale price for last year dropped 6.3 percent year-over-year, from $160,000 in 2009 to $150,000 in 2010. Also, key metrics used to value companies also fell slightly last year, with the average revenue multiple falling 2.1 percent and the average cash flow multiple falling 0.6 percent, the company stated.
"While access to financing for business acquisitions began to loosen up in the second half of 2010, it remains difficult for many business buyers to get the financing necessary to purchase a company," Handelsman added.
The small increase in sales activity in the fourth quarter could likely be attributed to seller concerns regarding the potential expiration of lower tax rates and the corresponding decrease in the business owner's after-tax proceeds from the sale of a business, according to BizBuySell.com.
BizBuySell.com's predictions for 2011? We will witness an accelerated recovery in the business-for-sale marketplace, citing the following industry drivers:
-- Latent Supply. While many business owners have hesitated to sell their businesses in the midst of a recession and flat/declining business performance, the recovering economy should reverse this trend and drive an increase in the number of businesses listed for sale. A compounding factor is that the earliest members of the U.S. baby boomer population, many of whom are business owners, have reached retirement age. As an increasing number of small business owners near retirement, this trend will continue to bring an above average number of small businesses to the sale market.
-- Latent Demand. Business brokers nationwide report a growing number of buyers looking to purchase a company. This is driven in part by declining business valuations, which makes buying a business more affordable, and in part by the nation's high unemployment numbers, which have convinced many laid-off employees to give entrepreneurship a try. According to Handelsman, the principal obstacle to making the transition from unemployment to business ownership remains a lack of available financing for business acquisitions.
-- Easing Credit. The Federal Government and the SBA have recently focused on helping banks ease their lending restrictions to provide necessary capital to the small business market. As capital becomes more readily available, it will be easier for brokers and business owners to close sales.
"It's very simple," Handelsman said in the released statement. "When credit is more readily available, the wheels of business succession will start to turn again. Until then, we can expect a moderate recovery in the business-for-sale marketplace."
Click here for CSNews Online's previous news story on BizBuySell.com's third quarter results and our exclusive interview with Mike Handelsman.
The BizBuysell.com Insight Report is released on a quarterly basis, reporting changes in closed transaction rates, valuation multiples and other economic indicators for the small business transactions market. The company currently has an inventory of more than 45,000 businesses for sale, and more than 725,000 monthly visits.
The chart below is provided by BizBuySell.com and includes the fourth quarter convenience store data on closed business-for-sale transactions.
| Quarter | Vertical (Subtype) | N | Median Sale Price | Median Ask Price | Avg. Sale/Ask Ratio | Median Revenue | Avg. Multiple of Revenue | Median Cash Flow | Avg. Multiple of Cash Flow |
| Q410 | Convenience Stores | 40 | 282,000 | 299,500 | 0.86 | 765,000 | 0.65 | 112,966 | 3.28 |
| Q310 | Convenience Stores | 35 | 260,000 | 299,000 | 0.84 | 745,000 | 0.55 | 96,000 | 4.29 |
| Q210 | Convenience Stores | 53 | 250,000 | 320,000 | 0.87 | 720,000 | 0.55 | 100,000 | 3.39 |
| Q110 | Convenience Stores | 68 | 285,000 | 297,000 | 0.96 | 564,000 | 0.51 | 100,000 | 4.18 |
| Q409 | Convenience Stores | 36 | 207,500 | 247,500 | 0.89 | 525,749 | 0.78 | 99,500 | 4.26 |
| Q309 | Convenience Stores | 44 | 237,500 | 283,000 | 0.87 | 775,000 | 0.75 | 100,000 | 3.17 |
Recently Closed Transactions Examples*
| Region | State | County | Business Subtype | Ad Headline | Sale Price | Asking Price | Sale/Ask Ratio | Revenue | Revenue Multiple | Cash Flow | Cash Flow Multiple |
| Midwest | IL | Cook | Convenience Stores | Convenient store for sale | $ 100,000 | $ 135,000 | 0.74 | $ 800,000 | 0.13 | $ 200,000 | 0.50 |
| Mountain | AZ | Maricopa | Convenience Stores | C-Store (profitable) priced for quick sale in central Phoenix | $ 150,000 | $ 160,000 | 0.94 | $ 620,000 | 0.24 | $ 110,000 | 1.36 |
*Closed transactions are self-reported to BizBuySell by the representing brokers. Not all closed transactions are reported to BizBuySell and BizBuySell does not collect data from for-sale-by-owner transactions.