C-stores in High Demand in Current Business-for-Sale Market

SAN FRANCISCO -- When it comes to real estate deals, convenience stores are proving popular, coming in second behind restaurants.

According to an August survey by BizBuySell.com, among prospective buyers, nearly 25 percent of survey respondents said they are considering a restaurant as their next business purchase. Convenience stores tied with Internet businesses as the next most popular target, at 18 percent each.

In the franchise industry, survey respondents also voiced a preference for existing franchise locations over new franchise opportunities. Thirty-four percent of buyers said they would consider an existing franchise location, while only 25 percent said they would be interested in purchasing a new franchise.

BizBuySell.com's nationwide survey polled more than 1,500 people currently interested in either buying or selling a business. Suggesting a strong business-for-sale market overall, the study found that both prospective business sellers and buyers are optimistic about their prospects of finding a match at an acceptable price.

According to the survey, 80 percent of prospective buyers felt confident they would earn an acceptable price and 65 percent of sellers felt they could get a price that met expectations. Buyers expressed this optimism despite the fact that 61 percent also felt businesses currently for sale are generally overvalued. Sellers didn't agree, with only 29 percent saying businesses are overvalued.

However, both sides agreed transactions can be completed in the current economic climate. That's a big shift from the dearth of small business transitions that took place during recent down-economy years, in which sellers were reluctant to sell struggling companies and there was a shortage of qualified buyers who could get acquisition funding to complete a purchase, according to BizBuySell.com.

"Qualified business buyers -- including individuals, companies and private equity firms -- are now very active in the market relative to previous years," said Curtis Kroeker, group general manager of BizBuySell.com. "At the same time, because they see more buyers entering the market, the majority of sellers are also optimistic. It's a virtuous cycle that bodes well for both buyers and sellers.

"With both sides ready to come to the table, we're seeing market fundamentals aligning in a way that bodes well for continued strong small business ownership transition volumes in the United States in the months and, hopefully, quarters to come," he added.

Though the survey results indicate it is a buyer's market, the tides are turning as sellers begin to get more for their money. While still low relative to pre-recession levels, cash flow multiples increased in the first two quarters of 2013, indicating that sellers are gaining more power at the negotiation tables and the market is starting to shift back toward a better balance, according to the company.

As the economy improves, more buyers and sellers think now is the time to get transactions done.

"People's perception of the economy has changed in the past 12 months," one seller noted, suggesting that the improving economy is getting buyers out in numbers.

Both buyers and sellers were confident they could close a deal quickly in today's market. Specifically, more than 78 percent of buyers believed they could find and buy a business within a year of starting their search, while 70 percent of sellers expected to be able to sell their companies within a year.

Financing remains an obstacle, the survey found, with many buyers indicating they desired to use seller financing to help fund a deal. "Even as lending begins to free up, seller financing remains a valuable tool for buyers to fund their business purchases," Kroeker said. "Although one in four sellers offer seller financing initially, it's likely many of them will end up offering seller financing as part of the negotiations in order to meet the buyers' needs and complete their transactions."

Seller financing could lead to post-sale involvement. According to the survey, both buyers and sellers appear to have realistic expectations regarding the transition process. Of buyer respondents, 75 percent said they would like the former owner to stay on for at least a day per week during the six months after a sale. Sellers seemed to be in agreement as 56 percent said they would be willing to stay on for at least a day per week to assist with the transition of the business to a new owner.

San Francisco-based BizBuySell.com is an Internet business-for-sale marketplace. Its nationwide survey is designed to better understand the current wants, needs and sentiments of buyers and sellers in today's small business market.