Brokers say 2013 was a great year in business-for-sale activity, believe 2014 could be even better as more buyers and sellers enter the market.
San Francisco, CA - December 17, 2013 -- In a nationwide survey of business brokers conducted by BizBuySell.com, the Internet's largest marketplace for buying or selling small businesses, 68% of respondents reported an increase in the number of transactions in 2013 and 83% felt that there will be even more small business sales in 2014.
Most brokers credited the transaction spike to a combination of the improving economy, and an increase in buyers and sellers on the market. When asked to identify the primary factor that helped more business transactions close in 2013, 30 percent attributed the spike to a rise in the number of interested business buyers on the market in 2013. Twenty-three percent said the greater number of transactions was due to an improved economic environment for small businesses in general.
Another 18 percent attributed the sales boom to an increase in the number of sellers listing their companies. So why did buyers and sellers decide 2013 was the right time to enter the business-for-sale marketplace?
The economy had a lot to do with it, according to brokers. Fifty-four percent of respondents who said more buyers were on the market credited increased confidence in the economic recovery. Another 19 percent believed buyers felt they were receiving strong value on their small business purchases. Brokers who saw more sellers on the market overwhelmingly (70 percent) felt that these owners had been waiting out the recession, and were finally confident they could sell for a good price in 2013.
"This year was certainly a big step forward for the business transaction market," Curtis Kroeker, Group General Manager at BizBuySell.com and BizQuest.com said. "After several years of gradual progress, there was a sharp spike in business transactions at the end of 2012 and it carried over throughout 2013. BizBuySell's transaction numbers increased every quarter of the year and it's good to see that the broker community noticed the same improvement."
Baby Boomers Could Drive Even More Small Business Sales in 2014
While 2013 was certainly a great year for the business-for-sale market, brokers believe next year could see an even higher number of businesses changing hands. A strong majority of brokers (83 percent) said they expect more small business transactions to take place in 2014 than occurred in 2013. They were specifically optimistic that more small businesses would be listed in 2014, as 25 percent of brokers attributed their prediction to an increase in the number of owners looking to sell next year. Twenty-three percent cited the continued improvement of the economy, while another 23 percent believed sellers' expectations would become more realistic, resulting in more accurate asking and sale prices.
"Owners don't want to wait any longer. They just want to move forward," one broker said.
The reason brokers are feeling confident about the growth of listed businesses in 2014 is the increasing number of Baby Boomers who are reaching retirement age and interested in selling their businesses. In fact, 50 percent of surveyed brokers estimated that more than half of the 2013 small business transactions were attributable to retiring Baby Boomers. Another 29 percent of respondents estimated 25 to 49 percent of 2013 sales included Boomer owners. While that is already a high number, brokers expect it to climb even higher in 2014. Seventy-six percent of respondents believed the number of Baby Boomers who will sell their business next year will outpace the number of owners who sold their companies in 2013.
Finally, over half of brokers felt the newly instilled Affordable Care Act regulations could encourage more small business owners to sell as they look to avoid the extra costs associated with the new laws.
Hurdles Still Remain Before Activity Reaches Pre-Recession Levels
While the business broker community is optimistic for the future, brokers also realize the industry is still far behind the level of activity reported before the recession. Forty-three percent of respondents believed it will take more than two years before business transaction volumes return to pre-recession levels. Another 21 percent thought it could be accomplished in 18-24 months, while 18 percent optimistically predicted it would take 12-18 months. Nine percent believe transaction volumes will never return to previous levels.
When asked what would most endanger the economic recovery and by extension, the booming transactions market, 35 percent listed a U.S. debt crisis in 2014, while another 21 percent were most concerned with small business health care costs.
"Overall brokers recognize the uncertainty of the economy, but still appear very confident that small business transactions will continue to rise in 2014," Kroeker added. "As more buyers and sellers, including Baby Boomers, continue to flood the market, all the pieces point to another strong year in the business-for-sale community."
Walker Sands Communications
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 48,000 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.