In the midst of a tough economy, billion-dollar corporations are not the only ones having to sell. According to a survey by BizBuySell.com, sales of small businesses (those with annual revenues of about $350,000) have increased 8 percent, from 1,106 in the second quarter of 2010 to 1,198 in the second quarter of 2011. This increase marks the highest number of small businesses sold since the fourth quarter of 2008.
Sales Prices Decrease in Spite of Selling Increase
At the beginning of the recession, many small business owners focused 100 percent on surviving difficult times and improving their performance. However, after several years of a recession, this focus has shifted for many company owners, who are ready to put their businesses on the market. Unfortunately, while the number of small businesses selling has increased, the sales price of these has decreased from an average of $155,000 in 2010 to $150,000 in 2011. The average asking price has declined as well, from $249,000 to $239,000.
Mike Handelsman, group general manager of BizBuySell.com and BizQuest.com, stated that a significant factor contributing to the increase in the number of sales is the availability of credit, since businesses and business buyers are just now reaching the point at which they can borrow money.
Small Businesses Sold in Service Sector
According to the survey, most of the small businesses sold were in the service sector (45 percent), followed by retail (26 percent), restaurants (18 percent), “other” businesses (7 percent), and manufacturing (5 percent). The average revenue of the businesses sold also dropped from $361,274 in the second quarter of 2010 to $340,000 in 2011. However, Handelsman attributes this decrease in revenue to smaller businesses being sold instead of to the declining health of the businesses.
Unfortunately, just about everyone is facing the frustrations of the several-year recession, including small business owners, many of whom have decided that selling their company is the best option. Despite this rise in the number of companies sold, however, research shows that both the average sale price and revenue are lower than they were in 2010.