Business-for-Sale Transactions reach highest level since Q4 2008

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The BizBuySell Insight Report is a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. Each quarter, BizBuySell analyzes sales and listing prices of small businesses across the United States based on approximately 45,000 businesses for sale and those recently sold. The BizBuySell Insight Reports focus on over 70 major U.S. markets and publish local, regional, state and national data for trending and analysis.

An expert on small business issues, BizBuySell and BizQuest Group General Manager, Mike Handelsman, discusses the trends revealed by the Insight Reports in various media outlets. Handelsman has been featured in numerous news publications regarding small business.

 

First Quarter 2012 Insight Report Summary

Business-for-Sale Transactions Jump Nearly 4% from First Quarter of 2011 According to BizBuySell.com Insight Report

BizBuySell’s Q1 data indicate most business sale transactions since fourth quarter of 2008

BizBuySell.com has released its latest economic data for the first quarter of 2012. The company’s data tracks trends in the sales of small businesses for sale and the latest data shows that nearly four percent more businesses were sold in the first quarter of 2012 compared to the same period last year. The results were included in BizBuySell’s First Quarter 2012 Insight Report.

The report, which aggregates business-for-sale transactions reported by participating business brokers nationwide, showed continued improvement in the business-for-sale market. In total, 1,729 closed transactions were reported in the first quarter of 2012, a 3.9 percent increase from Q1 2011.

 

The 1,729 businesses that were reported sold in the first quarter of 2012 mark the largest number of transactions since the fourth quarter of 2008, making this quarter the most active in over three years. Additionally, the quarter marks the third straight period of increasing business transactions after both Q3 and Q4 of 2011 saw improving conditions.

 

“Seeing small business transaction totals reach 2008 levels bodes well for the upcoming months,” Mike Handelsman, group general manager of BizBuySell.com and BizQuest.com said. “While we are not out of the woods yet, economic factors are slowly improving and have given the business-for-sale marketplace a nice boost to start 2012.”

 

Lower Valuations Lead to Lower Prices

 

A main driver of the increase in transactions is that business owners were willing to accept lower prices than in previous quarters. While total closed transactions increased in Q1 of 2012, average sale price as a multiple of both revenue and cash flow decreased compared with the same period last year. The average sale price as a multiple of annual revenue fell over 10 percent to 0.59, the lowest since the financial crisis at the end of 2008. The average sale price as a multiple of cash flow decreased by 4.7 percent to 2.36.

These falling multiples may point to business owners becoming more realistic about final sale prices. While median asking prices for sold businesses actually increased by $1,000, the median final sale price dropped 3.2 percent, from $155,000 in Q1 2011 to $150,000 in Q1 2012.

“Business owners are continuing to adjust their pricing in order to expedite a sale,” Handelsman said. “While some may still be holding out for an economic recovery, many more are trying to exit at acceptable prices, even if it means settling for a lower number than they originally expected.”

Better Financing Options, Unemployment Create Demand

Throughout the recession, one of the main obstacles for buyers to overcome was financing the transactions. Over the past year, credit market conditions have become more favorable. Banks are lending and more business owners are offering seller financing to prospective buyers. High unemployment rates also continue to create demand as out of work entrepreneurs seek to invest in new businesses.

“Lack of available financing is consistently named as one of the top reasons for a slow recovery by our audience of leading business brokers,” Handelsman said. “As buyers find more ways to fund their business acquisitions, we expect the increase in business transactions to continue.”

Continued Growth Expected for Rest of 2012

While valuation multiples dropped in Q1, median revenue for sold businesses grew from $346,000 to $360,000 compared to the same quarter last year. As these financials continue to improve, owners may finally have the confidence that their business is healthy enough to sell. Also, with many Baby Boomers reaching retirement age, the latent supply held over the past couple years could hit the market in the remainder of 2012.

 

Sector Sub-Sector Number of Reported Sales Median Sales Price Median Asking Price Sales to Asking Price (average) Median Revenue Revenue Multiple (average) Median Cash Flow Cash Flow Multiple (average)
Agriculture Agriculture 6 $1,887,500 $1,875,000 1.04 $5,522,984 0.47 $456,000 4.00
Communications Communications 13 $700,000 $700,000 0.85 $1,100,000 0.69 $480,000 2.10
Construction Construction-Building 18 $540,000 $635,000 0.93 $2,066,108 0.38 $330,120 2.60
Construction-Heavy 2 $741,500 $747,500 0.99 $632,500 1.16 $164,000 4.47
Construction-Special Trades 63 $450,000 $500,000 0.88 $992,873 0.55 $209,799 2.35
Electric, Gas, Water, Sanitary Svcs Electric, Gas, Water, Sanitary Svcs 4 $550,000 $612,500 0.92 $676,633 1.27 $221,229 2.58
Internet Business Services (B2B) 24 $267,500 $275,000 0.94 $345,130 0.97 $130,000 2.43
Consumer Services (B2C) 53 $130,000 $149,000 0.89 $199,989 0.79 $67,055 2.13
Domain Name/Basic Site 1 N/A N/A N/A N/A N/A N/A N/A
General Internet 19 $139,000 $145,000 0.88 $210,476 1.01 $62,224 2.44
ISP/ASP Services 2 $437,500 $500,000 0.89 $304,891 1.44 $242,500 1.86
Software 6 $1,275,000 $1,600,000 0.85 $785,284 0.93 $502,281 2.35
Web Design/Tech Services 4 $233,750 $271,250 0.90 $754,040 0.64 $181,903 1.86
Manufacturing Apparel & finished fabrics 7 $295,000 $339,500 0.90 $782,113 0.43 $121,451 2.40
Chemicals & Allied Products 8 $502,500 $502,500 0.93 $1,633,000 0.69 $200,000 3.48
Electronic & Electrical Equip. 10 $1,322,500 $1,425,000 0.94 $1,487,566 0.73 $384,197 3.49
Fabricated Metal Products 53 $600,000 $750,000 0.91 $1,000,000 0.76 $212,756 3.18
Food and Kindred Products 32 $445,000 $512,500 0.90 $849,773 0.64 $149,625 2.87
Furniture and Fixtures 8 $362,500 $380,000 0.88 $695,814 0.43 $172,467 2.62
Industrial & Comm. Machinery 13 $825,000 $1,300,000 0.92 $1,444,000 0.51 $384,893 2.93
Leather and Leather Products 1 $1,500,000 $1,500,000 1.00 $15,000,000 0.10 $1,000,000 1.50
Lumber and Wood Products 17 $362,500 $364,000 0.90 $610,000 0.67 $100,000 3.48
Measuring & Analyzing Instr. 2 $2,000,000 $2,000,000 1.00 $1,200,000 1.67 $624,000 3.21
Miscellaneous 54 $475,000 $585,000 0.90 $959,216 0.72 $164,502 3.17
Paper & Allied Products 2 $2,700,000 $2,712,500 0.97 $30,300,988 0.37 $1,075,000 2.58
Petroleum Refining 2 $378,500 $397,500 0.90 $329,131 1.12 $211,527 1.66
Primary Metal Industries 6 $450,000 $650,000 0.87 $777,624 0.61 $230,000 2.69
Printing, Publishing 45 $300,000 $337,500 0.89 $492,982 0.51 $106,973 2.25
Rubber and Plastic Products 13 $715,500 $995,000 0.88 $1,302,328 1.17 $346,429 3.25
Stone, Clay, Glass, Concrete 12 $145,000 $375,000 0.77 $619,699 0.64 $100,000 2.74
Textile Mill Products 1 $1,200,000 $1,200,000 1.00 $2,400,000 0.50 $500,000 2.40
Tobacco Products 1 $446,193 $435,000 1.03 $572,560 0.78 $220,809 2.02
Transportation Equipment 2 $1,275,000 $1,925,000 0.67 $3,900,000 0.33 $775,000 1.91
Mining Mining 10 $1,278,500 $1,297,500 0.90 $1,073,000 1.14 $556,814 1.89
Retail Apparel and Accessory Stores 67 $110,000 $125,000 0.87 $262,147 0.50 $48,000 2.34
Automotive Dealers 29 $345,000 $372,000 0.84 $1,100,000 0.43 $155,000 2.62
Bars/Taverns 267 $177,000 $199,000 0.87 $438,000 0.53 $83,250 2.53
Blding Mat., Hardware, Garden 38 $300,000 $322,500 0.92 $546,272 0.61 $102,995 3.08
Convenience Stores 230 $150,000 $179,500 0.86 $550,000 0.39 $100,000 2.27
Florists 48 $88,731 $102,000 0.91 $270,000 0.47 $60,000 2.24
Gasoline Service Stations 225 $400,000 $465,000 0.86 $1,555,081 0.47 $144,000 3.34
General Merchandise Stores 32 $90,000 $120,000 0.83 $360,000 0.43 $55,503 2.05
Home Furniture & Furnishings 28 $175,000 $187,500 0.89 $600,295 0.35 $100,000 2.17
Liquor Stores 262 $250,750 $279,500 0.87 $725,500 0.42 $107,383 2.79
Marine Dealers & Equipment 6 $250,000 $250,000 0.94 $885,000 0.45 $115,000 1.95
Miscellaneous Retail 232 $125,000 $149,000 0.87 $340,000 0.52 $70,000 2.43
Other Eating & Drinking Places 201 $116,500 $125,000 0.88 $310,407 0.48 $66,375 2.39
Other Food Stores 99 $160,000 $197,000 0.85 $417,500 0.42 $96,000 2.16
Pet Shops & Supplies 19 $156,000 $175,000 0.91 $364,807 0.38 $60,838 2.32
Restaurants 1298 $125,000 $149,000 0.87 $390,500 0.40 $71,570 2.16
Supermarkets 35 $350,000 $450,000 0.81 $1,700,000 0.37 $180,000 2.21
Vending Machines 55 $120,000 $129,000 0.88 $130,268 1.00 $54,899 2.22
Service Agents & Brokers 31 $175,000 $204,000 0.89 $189,037 1.32 $90,206 2.74
Amusement & Recreation 75 $150,000 $175,000 0.86 $300,000 0.66 $90,000 2.37
Auto Repair, Parts & Services 217 $250,000 $280,000 0.88 $588,000 0.69 $115,000 2.70
Beauty Salons, Barber Shops 190 $75,000 $95,000 0.87 $215,000 0.45 $50,191 1.82
Computer & Software Services 37 $225,000 $299,000 0.83 $400,000 0.91 $143,000 2.07
Drycleaning/Laundry Services 332 $149,500 $172,500 0.88 $180,000 0.92 $66,408 2.74
Educational Services 117 $200,000 $225,000 0.87 $370,000 0.76 $103,318 2.45
Engineering & Accounting Svcs 153 $200,000 $205,000 0.91 $185,000 1.02 $100,000 2.22
Finance, Banking, Loans, etc. 27 $125,000 $125,975 0.83 $158,910 0.70 $62,798 2.24
Freight, Moving/Delivery 63 $154,000 $175,000 0.89 $217,306 0.76 $86,700 1.99
Health, Medical & Dental 197 $305,000 $317,500 0.89 $470,139 0.73 $127,833 2.76
Hotels & Other Lodging Places 48 $400,000 $481,000 0.84 $250,000 1.44 $94,923 3.84
Landscaping & Yard Services 105 $120,000 $145,000 0.90 $200,000 0.70 $84,003 1.76
Legal Services 5 $418,500 $472,500 0.82 $738,500 0.59 $153,698 1.95
Marine Repair, Parts & Services 7 $290,000 $395,000 0.90 $1,032,600 0.65 $180,000 3.43
Membership Organizations 1 $799,000 $799,000 1.00 $1,501,000 0.53 $200,000 4.00
Miscellaneous Repair Services 36 $250,000 $294,000 0.86 $452,130 0.62 $142,000 2.01
Miscellaneous Services 178 $139,200 $150,000 0.90 $239,397 0.69 $85,400 1.89
Motion Pictures 5 $1,663,000 $1,687,500 0.80 $770,103 1.69 $242,635 4.60
Museums, Art Galleries, Zoos 1 $105,000 $175,000 0.60 $307,552 0.34 $80,862 1.30
Other Business Services 246 $202,500 $225,000 0.89 $381,581 0.62 $103,683 2.41
Other Personal Services 227 $80,000 $82,320 0.94 $112,536 0.66 $69,058 1.58
Other Travel & Transportation 20 $287,500 $300,000 0.91 $559,022 0.78 $131,160 2.27
Passenger Transportation 10 $180,000 $212,500 0.89 $312,500 0.83 $145,966 2.04
Pet Care & Grooming 38 $215,000 $260,000 0.88 $283,758 1.06 $78,898 3.03
Social Services 9 $137,500 $142,500 0.87 $380,879 0.59 $68,553 2.22
Storage & Warehousing 9 $294,000 $450,000 0.93 $321,380 1.63 $117,193 4.21
Travel Agencies 6 $87,000 $92,000 0.94 $249,911 0.46 $60,175 1.94
Wholesale Durable Goods 69 $350,000 $450,000 0.88 $963,708 0.55 $176,000 2.63
Nondurable Goods 120 $142,000 $150,000 0.91 $347,139 0.70 $80,044 2.14

Source: Small business transactions reported on BizBuySell.com during 2011

Closed Small Business Transaction Metrics by Geographic Market for 2011

Key metrics from transactions reported on BizBuySell.com

Time Period:
2011
Source:
BizBuySell
Market # of Reported Sales Median Asking Price Median Sale Price Sales to Asking Price (average) Median Revenue Median Cash Flow Revenue Multiple (average) Cash Flow Multiple (average)
Albany-Schenectady-Troy, NY 12 $229,000 $175,000 0.91 $600,000 $131,329 0.54 2.51
Albuquerque, NM 8 $315,000 $300,000 0.94 $596,174 $95,000 0.61 3.09
Atlanta-Sandy Springs-Marietta, GA 165 $150,000 $130,000 0.89 $367,000 $78,276 0.59 2.52
Austin-Round Rock, TX 54 $191,000 $160,000 0.87 $377,091 $91,529 0.59 2.08
Baltimore-Towson, MD 58 $284,450 $237,500 0.88 $497,500 $110,000 0.62 2.40
Birmingham-Hoover, AL 7 $115,000 $100,000 0.77 $265,000 $50,000 0.49 2.00
Boston-Cambridge-Quincy, MA-NH 128 $216,500 $199,000 0.89 $500,000 $108,000 0.50 2.35
Bridgeport-Stamford-Norwalk, CT 35 $177,500 $160,000 0.87 $300,000 $100,000 0.57 1.98
Buffalo-Niagara Falls, NY 0 N/A N/A N/A N/A N/A N/A N/A
Charlotte-Gastonia-Concord, NC-SC 43 $350,000 $310,000 0.89 $650,000 $118,000 0.69 2.20
Chicago-Naperville-Joliet, IL-IN-WI 122 $150,000 $140,000 0.88 $350,000 $70,000 0.54 2.29
Cincinnati-Middletown, OH-KY-IN 19 $212,000 $170,000 0.84 $298,731 $75,000 0.59 2.95
Cleveland-Elyria-Mentor, OH 34 $240,000 $200,000 0.86 $407,689 $60,000 0.47 2.71
Columbus, OH 39 $119,900 $110,000 0.86 $259,269 $54,000 0.43 2.42
Contra Costa-Alameda-Solano, CA 40 $225,000 $178,500 1.09 $336,150 $106,056 0.65 2.07
Dallas-Fort Worth-Arlington, TX 183 $235,000 $200,000 0.89 $440,580 $100,000 0.76 2.84
Dayton, OH 6 $75,000 $72,500 0.92 $504,000 $51,000 0.42 2.43
Denver-Aurora, CO 69 $179,500 $166,315 0.91 $395,000 $71,507 0.59 2.57
Detroit-Warren-Livonia, MI 61 $149,000 $110,000 0.84 $301,131 $62,500 0.60 2.46
Durham, NC 9 $325,000 $192,500 0.76 $424,721 $100,000 0.51 2.35
Fresno, CA 8 $300,000 $180,000 0.81 $406,992 $70,000 0.88 2.29
Greensboro-High Point, NC 8 $210,000 $190,000 0.89 $466,000 $101,500 0.48 1.72
Hartford-West Hartford-East Hartford, CT 26 $139,500 $100,000 0.85 $340,420 $60,000 0.54 1.92
Honolulu, HI 6 $155,000 $130,000 0.93 $187,246 $65,000 0.84 1.67
Houston-Sugar Land-Baytown, TX 144 $150,000 $128,000 0.91 $294,791 $75,000 0.59 2.02
Indianapolis-Carmel, IN 35 $180,000 $132,500 0.84 $400,000 $64,051 0.55 2.67
Jacksonville, FL 44 $122,500 $115,000 0.87 $313,892 $75,569 0.57 2.06
Kansas City, MO-KS 32 $198,000 $153,750 0.88 $245,000 $85,000 0.71 2.49
Las Vegas-Paradise, NV 41 $99,525 $89,500 0.91 $298,902 $65,000 0.39 1.61
Los Angeles-Long Beach-Santa Ana, CA 389 $175,000 $150,000 0.87 $350,000 $81,000 0.58 2.36
Louisville-Jefferson County, KY-IN 23 $159,000 $137,500 0.89 $245,000 $65,500 0.55 3.25
Memphis, TN-MS-AR 14 $135,000 $125,000 0.89 $400,000 $75,000 0.37 2.48
Miami-Fort Lauderdale-Miami Beach, FL 249 $184,500 $161,500 0.87 $368,616 $98,289 0.57 1.91
Milwaukee-Waukesha-West Allis, WI 17 $160,000 $157,530 0.92 $316,381 $46,220 0.70 2.41
Minneapolis-St. Paul-Bloomington, MN-WI 66 $172,500 $127,500 0.92 $306,739 $72,942 0.59 2.70
Nashville-Davidson–Murfreesboro, TN 65 $149,500 $115,000 0.83 $248,500 $60,013 0.62 2.18
New Haven-Milford, CT 25 $175,000 $140,000 0.84 $450,000 $73,767 0.47 2.01
New Jersey 264 $200,000 $189,000 0.88 $360,000 $100,000 0.68 2.35
New Orleans-Metairie-Kenner, LA 3 $195,000 $180,000 0.92 $195,000 $110,000 0.92 1.64
New York-Northern New Jersey-Long Island, NY-NJ-PA 568 $225,000 $200,000 0.87 $435,500 $107,232 0.62 2.24
Oklahoma City, OK 15 $141,750 $92,500 0.85 $216,000 $82,500 0.63 2.10
Orange County, CA 161 $147,000 $117,000 0.88 $300,000 $72,000 0.58 2.28
Orlando-Kissimmee, FL 153 $147,000 $125,000 0.85 $302,676 $80,343 0.55 1.84
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 157 $195,000 $160,000 0.88 $365,000 $100,000 0.59 2.30
Phoenix-Mesa-Scottsdale, AZ 168 $137,100 $120,000 0.88 $247,155 $63,056 0.62 2.10
Pittsburgh, PA 34 $320,000 $287,000 0.84 $761,000 $143,336 0.44 2.24
Portland-Vancouver-Beaverton, OR-WA 59 $170,000 $170,000 0.90 $385,000 $68,739 0.46 2.82
Providence-New Bedford-Fall River, RI-MA 18 $300,000 $300,000 0.94 $470,000 $103,064 0.58 2.68
Raleigh-Cary, NC 35 $250,000 $225,000 0.94 $550,000 $110,115 0.60 2.45
Richmond, VA 21 $117,500 $104,500 0.87 $166,250 $82,500 0.54 1.95
Riverside-San Bernardino-Ontario, CA 76 $249,500 $235,000 0.87 $499,448 $109,500 0.55 2.15
Rochester, NY 0 N/A N/A N/A N/A N/A N/A N/A
Sacramento–Arden-Arcade–Roseville, CA 30 $149,500 $134,500 0.91 $299,000 $67,061 0.69 2.62
Salt Lake City, UT 28 $350,000 $350,000 0.95 $236,113 $120,474 1.06 3.15
San Antonio, TX 53 $160,000 $137,500 0.92 $213,000 $92,500 0.71 2.46
San Diego-Carlsbad-San Marcos, CA 74 $169,000 $150,000 0.87 $378,162 $85,000 0.53 1.94
San Francisco-Oakland-Fremont, CA 67 $250,000 $182,000 0.95 $400,000 $98,034 0.61 2.35
San Jose-Sunnyvale-Santa Clara, CA 30 $220,000 $160,000 0.88 $600,000 $90,000 0.54 2.61
Seattle-Tacoma-Bellevue, WA 99 $199,000 $175,000 0.87 $481,116 $85,000 0.48 2.52
St. Louis, MO-IL 15 $174,600 $154,500 0.77 $246,366 $55,137 0.76 3.19
Tampa-St. Petersburg-Clearwater, FL 243 $149,000 $130,000 0.90 $350,000 $75,000 0.55 2.18
Tucson, AZ 25 $154,500 $149,500 0.89 $258,112 $81,602 0.60 2.43
Tulsa, OK 4 $109,944 $104,944 0.86 $129,201 $39,526 0.95 2.43
Virginia Beach-Norfolk-Newport News, VA-NC 37 $195,000 $152,000 0.83 $428,050 $79,916 0.70 2.33
Washington-Arlington-Alexandria, DC-VA-MD-WV 227 $199,000 $170,000 0.86 $450,000 $90,000 0.50 2.49
Wichita, KS 13 $234,850 $202,250 0.87 $441,000 $74,500 0.45 2.76

 

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