Record Number of Small Businesses Bought and Sold in 2018
Not only did 2018 prove to be a rather good year to be a small business owner but it also turned out to be a historic year to sell a small business. According to the business resale site BizBuySell, 2018 saw a record number of small businesses changing hands. Moreover this marked the third year in a row where a new high for business buying and selling was set.
BizBuySell found that 10,312 businesses were reported to have been sold in 2018, representing a 4% increase from 2017’s 9,919. Impressively the figure was also 31% above the 7,842 business sold in 2016, which itself was a record at the time. That said, it should be noted that the site has only been tracking business sales since 2007 so this “all-time high” is really only confirmably a 12-year high.
So why the continued increase in sales? One surveyed business owner floated a theory, saying, “I think our society as a whole has put more emphasis on small businesses and has made the pathway to business ownership easier to see for first-time entrepreneurs, which is great as the market continues to perform well.” Similarly another business owner suggested that the strength of the economy was helping the entrepreneur bug bloom in more individuals, telling the site, “The strong economy is giving people confidence to be their own boss, and move away from working for others.” Meanwhile BizBuySell President Bob House notes, “The business-for-sale market has remained balanced for quite a few years now, allowing both buyers and sellers to confidently enter the market and walk away with a deal to their liking. Small business ownership is the American dream and with a growing number of listings hitting the market, there should remain a steady stream of entrepreneurs ready to take over these businesses.”
While all of those were important factors, it’s also worth noting that the average sold business in 2018 was financially healthier than those of years past. For example the median revenue of business sold in 2018 was found to be $531,653 — up 6.3% from 2017’s median of $500,000. Median cash flow also increased, climbing from $115,000 two years ago to $120,000 last year. Looking beyond that hard data, just shy of half (49%) of business owners surveyed reported that 2018 was a better financial year for their business than the year prior. In contrast only 11% said the year marked a decline while 36% said business was about the same.
As you might expect, the increase in revenue also made for higher asking prices. In 2018 the median going-rate for a small business was $275,000. That’s a 10% increase over 2017’s median. While that’s relatively modest compared to the 77% increase that the Times Union reported back in May, that study was not only conducted less than halfway into the year but also looked specifically at the Captial Region of Albany, New York.
Overall it seems like 2018 was a great year for business owners looking to move onto other ventures or retire. With a strong economy seemingly spurring optimism, it’s really no wonder that new entrepreneurs were ready to step in and take over for those exiting their businesses. Will 2019 continue the rising streak? We’ll just have to wait and see.