BizBuySell.com Reports Continued Decline in Business-for-Sale Transactions for First Quarter 2009
Small business sellers faced with lower business valuations as buyers struggle to gain access to capital.
San Francisco, CA -- April 7, 2009 -- BizBuySell.com, the Internet's largest marketplace for buying or selling a small business, today released economic data for the first quarter of 2009 that suggests the struggling economy has continued to negatively impact small business-for-sale transactions and valuations.
According to the BizBuySell.com First Quarter 2009 Insight Report, the number of closed transactions reported to the site in the first quarter of this year decreased by 36% as compared to the same time period in 2008. Closed transactions are reported to BizBuySell.com by business brokers nationwide.
As the U.S. stock market and the overall economy have worsened in the last quarter, so has the small business marketplace. BizBuySell.com’s fourth quarter 2008 data reported a 20% year-over-year decrease in closed transactions, indicating that even fewer deals have been getting done in the first months of 2009.
“It’s not surprising that the number of closed small business transactions continues to decrease,” says Mike Handelsman, General Manager of BizBuySell.com. “Many business brokers are reporting a record level of buyer interest, but limited access to capital and uncertainty about the future have proven to be major barriers in deals getting off the ground and closed.”
Popular Business Valuation Metrics Are Down
In addition to fewer completed deals, BizBuySell.com notes a decline in the metrics that are used to value companies. Compared to the same quarter in 2008, both revenue multiples and cash flow multiples have declined.
Revenue multiples on reported closed transactions dropped 5.5% to .69 in the first quarter of 2009. Similarly, cash flow multiples dropped to 2.69, representing a 3.8% decrease. The revenue and cash flow multiples are calculated by dividing the selling price of the business by its reported annual revenue or cash flow.
The median sales price for closed transactions also declined year-over-year, from $200,000 to $165,500 – a 17.3% decrease.
“Even though record levels of corporate layoffs have created tens of thousands of hopeful entrepreneurs, the decreasing sales prices and revenue and cash flow multiples make it clear that buyers are approaching deals with more caution than ever,” says Handelsman. “Buyers are wary of paying sellers’ typical asking prices because they don’t feel confident that the businesses will be able to survive down the line.”
Key Takeaways for Business Sellers and Buyers
The current market presents a unique set of opportunities and considerations for business buyers and sellers. BizBuySell.com suggests that buyers and sellers pay close attention to the following:
The BizBuySell.com First Quarter 2009 Insight Report includes business-for-sale metrics for the total U.S. and for more than 70 major metropolitan areas. Metrics are also available by industry and business type. The current Insight Report comprises data from 1,146 closed transactions and more than 27,500 active listings.
For more information on the BizBuySell.com First Quarter 2009 Insight Report, visit /news/media_insight.html.
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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