BizBuySell.com, the Internet’s largest business-for-sale marketplace, reported recently that the number of small business transfers reached a record high in 2017, exceeding the previous high set in 2016 by 27 percent. BizBuySell.com aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.
This year’s increase marks a noteworthy upward shift in the number of small businesses changing hands across America. For several years after the 2008-2009 Great Recession, sales volume remained low as small businesses struggled financially and capital for financing remained tight. Beginning in 2013, as the economy recovered, closed transactions have steadily increased. But 2017 represents a significant increase, with 9,919 closed transactions reported compared to the 7,842 in 2016.
The median revenue of sold businesses grew 5.8 percent in 2017 compared to 2016. Median cash flow also increased almost 7 percent.
The selling price of the reported businesses, expressed as a multiple of discretionary earnings (sometimes referred to as cash flow), was approximately 2.7. Expressed as a percentage of gross revenue, the transactions averaged about 60 percent.
The highest priced businesses stated by a multiple of discretionary earnings were in Buffalo, New York and Dayton, Ohio. The lowest were in Hartford, Connecticut and Las Vegas, Nevada.
Arkansas business broker Richard Roberts confirmed the active market conditions. “This is the strongest market for privately held businesses that I’ve seen,” said Roberts. “Quality businesses are coming to market and buyers are finding acquisition financing readily available for profitable businesses.” Roberts is an Accredited Business Intermediary and Managing Broker at Aegis Business Advisors in Fayetteville.
The Dow Jones stock market index at an all-time high. Additionally, the National Federation of Independent Businesses reports that their Business Optimism Index is in record territory. With high business confidence, strong profits and the availability of acquisition financing, it appears that 2018 and beyond will be a favorable timeframe for small business owners and buyers.
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