There’s good news for small business owners interested in either selling their companies or buying one: More businesses were sold in the first quarter of 2016 than last year and the average selling price was the highest in nine years.
Those were just some of the results of the annual survey of prospective small business buyers and sellers by BizBuySell, an internet marketplace for sales of businesses. The statistics showed that more businesses were for sale in Q1 of 2016 than at any time in the past seven years. Part of that, certainly, is due to the increasing financial health of the businesses for sale.
The survey showed that the median asking price for a small business increased by 11 percent in the last year to $249,500, while the year-to-year median sale price increased a very healthy 10 percent – from $200,000 to $220,000. Those positive financials put both buyers and sellers in strong positions, though the market may now be tilting to sellers, based on the sale to asking price ratio of approximately 90 percent.
The survey – of 1,700 small business owners who have indicated an interest in selling and more than 1,300 potential buyers – provides a glimpse of the people and motivations behind the numbers.
For example, prospective sellers are mostly college-educated white men at least 50 years old. Only 22 percent of the sellers identified themselves as female and 8 out of 10 are married. There is more diversity among younger sellers – more than 3 out of 10 sellers between the ages of 30 and 49 are black, Asian or Hispanic. That compared to only 8 percent of sellers 65 and older.
One significant trend indicated by the survey is “serial entrepreneurship.” Nearly 40 percent of the sellers said they have a parent or grandparent who owned a small business and 16 percent had both. In addition, nearly 6 out of 10 sellers said they had owned at least one business previously.
Why are all of these businesses available? The top motivation listed by the survey was retirement, and with a record number of Baby Boomers at or nearing retirement age in the country, that makes sense. Burnout was cited by 21 percent of sellers while the desire to move up to a bigger business was cited by 20 percent.
Demographically, buyers look very similar to sellers – 78 percent male, mostly white and just slightly younger than the sellers – in their 40s and 50s.
According to Bob House, general manager for BizBuySell.com and BizQuest.com, the selling trend is expected to continue in the second quarter – traditionally one of the most active quarters of the year for business transactions.
Read the report from BizBuySell.