BizBuySell Announces Third Quarter Insight Report: It's Still a Sellers' Market for Business Owners Who Want to Cash Out
Online business-for-sale marketplace notes rising demand for businesses and shortage of supply.
San Francisco, CA – October 1, 2008 – BizBuySell, the Internet's largest marketplace for buying or selling a small business, announced today the results of its Third Quarter 2008 Insight Report, which tracks trends on for-sale and sold businesses in the U.S. According to the report, business valuations are on the rise in spite of a volatile economy.
The latest data is based on a representative sampling of over 50,000 business-for-sale listings on BizBuySell.com and 1,400 closed transactions, as reported by business brokers across the country. It reflects mostly good news for sellers, even if the economy might suggest otherwise.
“The BizBuySell third quarter data suggests that it's still a sellers' market,” says BizBuySell.com General Manager Mike Handelsman. “The key metrics used to determine small business valuations are on the rise. That means that a seller can get more money today for each dollar of revenue or cash flow than they did one year ago. That's good news if you are one of the many baby boomers who own a business and are looking to cash out to fund your retirement.”
In fact, year over year, the average revenue multiple for closed business-for-sale transactions jumped 7.9% from 0.64 to 0.69. The average cash flow multiple for those same transactions jumped by the same percentage from 2.57 to 2.77 year over year.
Handelsman says the multiples used to calculate business valuations are going up in part because weaker businesses are opting to wait to sell until the economy improves.
“Overall, we’re seeing a smaller supply of businesses for sale, but an increase in the quality of businesses for sale,” says Handelsman. “This leads to rising multiples that buyers have to pay for those businesses. Although it goes against conventional wisdom, strong businesses can still command good prices."
BizBuySell cites these additional factors as contributors to rising valuation metrics:
Despite the rise in revenue and cash flow multiples, however, it doesn’t mean it’s a good time for every business owner to sell.
According to a recent BizBuySell broker survey, 68% of business brokers say they are seeing the same amount or fewer listings now than they saw one year ago. This slowdown in business-for-sale transactions appears to be based on economic issues, as 92.6% of the respondents who are getting fewer business-for-sale listings indicated uncertainty of the economy or decreased business performance as being the primary drivers of the changing number of new business-for-sale listings.
"Based on what the nation's business brokers are saying, it seems likely that more business owners will be sitting out this economic storm, holding off on selling their businesses until the economy turns around," notes Handelsman. "Buyers have additionally taken significant hits to traditional sources of financing, such as home equity and 401k’s. This, combined with lack of credit, indicates that the market may have significant struggles ahead."
More information about local and industry-specific business valuations is available online at www.bizbuysell.com.
About the Insight Reports:
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 U.S., based on more than 50,000 businesses for sale and those recently sold. The BizBuySell Insight Reports focus on over 60 major U.S. markets and publish local, regional, state and national data for trending and analysis.
BizBuySell is the Internet's largest business for sale marketplace. Since 1996, BizBuySell has offered tools that make it easy for business owners and brokers to sell a business, and potential buyers to find the business of their dreams. BizBuySell currently has an inventory of approximately businesses - spanning 80 countries - for sale at any one time and receives more than monthly visits. The site also features an extensive franchise directory as well as an easy-to-use business valuation tool. Please visit www.bizbuysell.com for more information.
BizBuySell was founded in 1996 and in 2012 became a division of CoStar Group, Inc. (NASDAQ - CSGP) - commercial real estate's leading provider of information and analytic services. CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information and offers a suite of online services enabling clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. For more information, visit www.costar.com.
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