An eight percent year-over-year increase in closed business-for-sale transactions in Q2 2011 suggests a latent supply of profitable businesses coming to the market.
San Francisco, CA - July 1, 2011 -- BizBuySell.com, the Internet's largest marketplace for buying or selling a small business, today released its Second Quarter 2011 Insight Report on business succession trends. The report, which aggregates business-for-sale transaction data provided by participating business brokers, shows continued improvement in business succession activity, as closed transactions increased eight percent from 1,106 in Q2 of 2010 to 1,198 in Q2 of 2011.
"We've been anticipating an upward trend in the business-for-sale market as more profitable businesses start to become available for sale," said Mike Handelsman, Group General Manager, BizBuySell.com and BizQuest.com. "This trend has begun to show in recent quarters and the Q2 results accelerate the trend. As capital availability continues to gradually improve we expect the market to continue to strengthen throughout the remainder of the year."
The number of closed transactions reported in Q2 2011 is the most BizBuySell.com has seen since Q4 of 2008. According to Handelsman, the increase is likely a result of latent sellers who were waiting for improvements in business performance.
"In tough economic times, many sellers are 100% focused on survival and performance improvement," said Handelsman. "But now their efforts have begun to pay off and their businesses are becoming profitable again. As such, many are finally ready to put their business on the market."
Slight Decrease in Financials Suggest Smaller Businesses Selling
While closed transactions showed a healthy increase in Q2 of 2011, median revenue of the businesses sold decreased by about 6%. In Q2 of last year, median revenue was reported at $361,274, while this year it was reported at $340,000. However, Handelsman notes that this decrease suggests that smaller businesses are being sold, not that the health of businesses is decreasing.
"While median revenue has decreased slightly, median cash flow and median sale price figures have both remained virtually flat," Handelsman explains. "So, smaller, profitable businesses are likely being sold and helping to drive the increase in closed transactions."
Capital Availability Continues to Slowly Improve
While it is still a tight capital market, the lending environment does seem to be improving. Moreover, more sellers are recognizing the key role that seller financing can play in the current market to help them differentiate their business for sale and close a transaction. The combination of these factors is having a positive impact on overall transaction volume.
"Businesses and business buyers are only now getting to the point where they can borrow money," Handelsman said. "We still expect it will take time for transactions to reach pre-recession levels, but headway is being made."
Appendix: Additional Sales Statistics
BizBuySell.com is the Internet's largest marketplace for buying or selling a small business. The company releases its BizBuySell.com Insight Report on a quarterly basis, reporting changes in closed transaction rates, valuation multiples and other economic indicators for the small business transaction market. Closed transactions are reported to BizBuySell.com by business brokers nationwide.
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 45,000 businesses - spanning 80 countries - for sale at any one time and receives more than 1 million 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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