Current State Of Small Business Sales
According to BizBuySell’s Q2 2021 Intelligence Report, the current state of small business sales saw continued gains from the pandemic impact. Closed transactions increased by 5% over the prior quarter.
Although transactions are up 38% compared to last year’s peak of pandemic lockdowns they are still 16% below pre-pandemic Q2 2019 levels. This indicates that there is potential for recovery.
Q2’s median sale price of $320,000 was 19% more than Q2 2019, pre-pandemic levels. This is the same as last quarter’s record high.
Details of The Current State Of Small Business Sales
In contrast to last year, the first half of 2021 has shown that buyers are more interested in re-opening retail sectors like restaurants and bars. These sectors are responsible in large part for the rise in transactions in Q2
Restaurant acquisitions increased 17% with median sales prices rising 34% to $200,000 and average revenue multiples increasing 23%.
The number of retail business acquisitions increased 14% over the previous quarter. The median sales price fell 11% to $262,000 due to a decrease in revenue and cash flow of 5% and 9.9%, respectively.
Only 1% of service business acquisitions went up. The number of manufacturing acquisitions fell by 9%.
Many businesses have experienced a slowdown in growth due to a lack of labor and rising costs. 47% of respondents said they have difficulty hiring and retaining employees. 48% of those surveyed experienced shortages in goods and supplies.
76% of owners are experiencing rising costs. These problems began in 2019 because of U.S.-China trade tariffs. They have only gotten worse during the pandemic.
Small Business Sales Forecast
The report’s authors write that “anything is possible after 2020’s unexpected turn in events and the lingering uncertainty about COVID variants, as a potential change of trajectory,” All signs point toward a recovering business-for-sale marketplace.
The market has been active and there have been many buyers – even though the pandemic had disrupted almost every aspect of the economy. Although supply was limited and slow to follow up, it has provided a great opportunity for some owners to make it big.
For buyers, the report shows that 58% of buyers want businesses that can sustain pre-pandemic values, while 46% would consider one that has performed well in the past year. 58% of business brokers expect that more owners will sell in the second half year. 21% of them anticipate significantly more.
For business sellers, 42% of owners feel that now is the right time to sell, compared with 25% who don’t and 34% who are still uncertain.
22% of business brokers and business owners expect that the market for business-for-sale will fully recover in 10-12 months.
Summing Up The Current State Of Small Business Sales
According to the report, one of the features of the current state of small business sales is the market is still struggling to recover because of the number of business owners in less favorable positions. According to business brokers, revenue is the most important element to drive the market. The pandemic has left many business owners with financial losses. Many small businesses are scrambling to rebuild operations to pre-pandemic levels.
Although the small business sales market appears to be on the right path for recovery, economic volatility is still high. The reverberating effects from the pandemic are still evident. Tax reform and new policies could also be in the future, which could create further complications or stimulate activity.
The future market activity is still driven by Baby Boomer-owned businesses. These Boomers will have to sell in the coming years. While most owners were eager to get through the pandemic, they now find themselves in a situation where labor shortages are hampering business growth and reducing the enjoyment of being a business owner.
We have learned a lot from the past year about how external factors can affect our businesses and our exit timings. It is time to create an exit strategy if you’re a business owner and are considering selling in the near future. Make sure that you are ready to cash out your business as soon as possible. Learn all you need to know in order to preserve your company’s continuity, maximize your business value, and reach your exit goals.
Should you need any guidance or advise regarding selling your business, please contact our office to schedule your complimentary consultation.