BizBuySell.com Q3 2012 Insights Report indicates small business getting healthier and business-for-sale market growing slowly amidst uncertainty of election, tax changes
San Francisco, CA - October 8, 2012 -- BizBuySell.com, the Internet's largest business-for-sale marketplace, reported today that third quarter business-for-sale transactions increased 2.8 percent over the same period of 2011. Year to date transaction totals also remain above 2011 as the market continues down the slow road to recovery. The results were included in BizBuySell's Third Quarter 2012 Insight Report, which aggregates business-for-sale transactions reported by participating business brokers nationwide.
In total, brokers reported 1,189 closed business transactions, an increase of 2.8 percent from the 1,157 cited in Q3 of 2011. The small bump helps negate the 1.6 percent drop in sales recorded in Q2 of 2012 and continues the trend of a gradual, yet bumpy improvement in the business-for-sale marketplace since numbers bottomed out in Q2 of 2009.
"Over the past two years we've seen similarly small increases in the business-for-sale market as economic conditions and overall business performance have improved," Mike Handelsman, Group General Manager of BizBuySell.com and BizQuest.com, said. "This quarter's growth was likely assisted by sellers looking to exit their businesses before the anticipated increase in the capital gains tax rate at the close of 2012."
Small Businesses Health, Valuations on the Rise
Another positive trend that continued in the third quarter of 2012 was the improvement of small business health in general. Businesses listed on BizBuySell.com had a median cash flow of $98,172 in Q3 of 2012, an improvement from the $96,000 recorded in Q3 of 2011. This is the third straight quarter in 2012 that median cash flows have improved from the previous quarter. Sold businesses also experienced improved financials this quarter. The median revenue of closed transactions came in at $385,327 and median cash flow was recorded at $94,880. Both numbers mark notable improvement from the $377,981 and $89,756 cited in Q3 2011.
These improved financials are now allowing sellers to both ask for and receive more money for their businesses. The median asking price for business listed on BizBuySell.com during Q3 2012 was $239,000, an increase from the $235,000 being asked a year ago. Median sale price of closed transactions was recorded at $174,000, a substantial improvement from the $150,000 sellers received in Q3 2011. In fact, the median sale price of sold businesses this quarter represents the highest amount sellers have received in over two years.
"Since the recession hit in 2008, most sellers have been forced to settle for lower than expected sales prices," Handelsman said. "But as their business financials improve, more sellers are more confident and it's paying off in the form of higher sale prices."
Uncertainty Remains Amongst Buyers, Sellers
While BizBuySell.com did note an overall improvement in the health of small businesses listed and/or sold on its site, overall economic uncertainty among both buyers and sellers likely dampened the numbers. Near-term uncertainly remains around upcoming issues including the November election, the expected fiscal cliff at the end of 2012 and the overall global economy fragility. Financing options also continue to be difficult, meaning many business owners are waiting to sell until there is a more well-funded group of buyers in the market.
One item that has helped to offset these uncertainties however is the increasing number of small business sellers willing to offer their own financing options. By agreeing to take a smaller lump sum up front and agreeing receive the rest of the payment over time, sellers are pushing more deals through despite the continued lack of third-party funding.
Continued Gradual Improvement Expected Amidst Concerns
Because of the many pending uncertainties for the remainder of 2012 and into 2013, the outlook of the business-for-sale market is cloudy at best. Many sellers will no doubt be watching the presidential election closely and making their own assumptions as to what the result will mean for their business future. Others may be trying to sell quickly in order to avoid potentially paying more taxes in a 2013 deal due to the anticipated increase in the capital gains tax rate.
"With so many macroeconomic factors in play, there will be a lot of uncertainty with both buyers and sellers in the marketplace," Handelsman said. "Overall, however, we expect the business-for-sale market to continue on the same slow yet bumpy road to improvement we've experienced over the past two years."
About the BizBuySell.com Insight Report
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.
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.