Small Business Resale Prices are Climbing
Small business owners looking to sell may be able to fetch more these days thanks to rising revenues and other factors. As the Times Union reports, asking prices for on-the-market businesses have been climbing in recent months as tax reform and a strong economy bolster returns. Although the Times Union’s research looked specifically at businesses in the Captial Region of Albany, New York, it stands to reason that their findings are fairly representative of other areas of the country as well.
During the first quarter of this year, the Capital Region had 83 active business listing on the popular business resale site BizBuySell. Although that figure is down 36% from the same time a year ago, the median asking price was up 77%. In fact one-quarter of those businesses were listed for more than $1 million. Furthermore, among transactions tracked by the Times Union, business owners closed deals for an average of 94% of their ask price.
One big reason why business owners are asking for more is because their operations are making more. According to the Times Union, median revenue among Albany-area business was up 46% in Q1 2018 compared to Q1 2017. As senior marketing director Adam Debussy concluded, “Businesses are performing really well.”
Beyond increasing revenues, there also seems to be a growing interest in entrepreneurship and buying existing small businesses. Bill Brigham, who serves as the director of the University of Albany Small Business Development Center, told the Times Union, “We’ve seen a great deal of small businesses being bought. Volume has definitely increased.” Brigham added that other businesses in the area are also expanding, which in some cases could potentially lead to franchise opportunities.
What remains to be seen is whether rising asking prices for small business will cause sales to decline or whether the positive economic signs will increase interest further. On the one hand, some would-be business buyers may now feel outpriced by the current conditions. However, others may feel more confident that now is the time to buy. Desbussy voiced the latter line of thinking, saying, “If I was a buyer and I had the cash, it would be more enticing because I would feel more comfortable buying a business that’s profitable in a good economy.”
Overall, following the passage of the recent tax bill and the continued strength of the economy, it does seem like a good time to be a small business owner. Of course, for those entrepreneurs ready to hang up their hats or move onto other projects, now could also be a great time to take advantage of the current market by selling. In either case, it seems there more reason for business owners to be optimistic after all.