In 2007 BizBuySell started collecting the data for the number of small businesses bought and sold in a single year. According to the company’s Annual 2018 Insight Report, it’s been a record year for buying and selling a small business.
As per the BizBuySell insight report, 10,312 businesses sold in the year. This was a 4% increase from 2017 (9,919 businesses sold) and a 31% increase from 2016 (7,842 businesses sold).
As to what is driving the record numbers, Bob House, President of BizBuySell.com and BizQuest.com, said a strong economy has given individuals the confidence to be their own boss as well as their belief the economy will remain strong.
He further added, “We expect continued strong deal flow, but both buyers and sellers should also keep a close eye on factors that could affect the marketplace such as political gridlock, potential tariff impacts, rising interest rates, and stock market volatility. Those can be good indicators of how the market could shift moving forward.”
2018 Small Business Financial Health
With the growth of 6.3% in business valuation, there is an increase in the median revenue of sold business from $500,000 in 2017 to $531,653 in 2018.
The businesses being sold also increased their median cash flow by 4.3%, from $115,000 in 2017 to $120,000 in 2018.
According to BizBuySell Insight Report, both numbers represent the highest financial performance of sold businesses since the company has begun tracking the data.
BizBuySell also surveyed business owners regarding performance and outlook.
49% said their business performed better in 2018 as compared to 2017. Another 36% state they had similar outcomes and just 11% said they had a worse year.
When asked why they believe 2018 was such a good year, 49% gave credit to the economic conditions of the country, while 22% said consumer confidence and 7% crediting improved management practices.
2018 Small Business Value
Along with the performance of a small business, the value of these businesses on the open market was also increased. Because of this, businesses owner were able to ask and receive higher prices in 2018.
The median asking price is $275,000, increase by 10% from 2017. This lead to an increase in the sales price, which was up 9.3% in 2018 to $249,000 from $227,800 in 2017.
BizBuySell surveyed buyers who had purchased a small business within last year. 40% believed it was accurately priced, 31% said the business was overpriced. While 15% thought they got a good deal, in fact, the business was underpriced.
Business brokers see these higher sale prices continuing in 2019. In fact, 37 percent of brokers said they expect small business sale prices to increase next year, with another 49 percent believing prices will remain consistent with 2018’s historically high levels.
So where were these businesses being bought and sold?
The best performing cities top by Los Angeles, Long Beach, Santa Ana with 691 transactions. Followed by New York, Northern New Jersey, Long Island with 672 transactions.
For detail check out the report.