Small Business Transactions Reach Record Levels in 2014, According to Report

On Jan 28, 2015

BizBuySell.com, the Internet’s largest business-for-sale marketplace, reported today that small business transactions reached record levels in 2014 as brokers reported the highest number of businesses changing hands since BizBuySell started tracking data in 2007. The full results are included in BizBuySell.com’s 2014 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.

A total of 7,494 closed transactions were reported in 2014, an increase of over six percent from the 7,056 transactions in 2013, which was the previous record. This marks the second straight year of such strong activity after several slow years during and immediately following the recession. On average, 2013 and 2014 transaction totals are up 55 percent over the recession and recovery period from 2010 through 2012.

The increasing volume of small businesses changing hands can be attributed to a number of factors. In BizBuySell’s December survey of business brokers, respondents cited an increase in the number of qualified buyers in the market as the top driver of growth. The second most common response was the general improvement of the small business environment. At the same time, retiring Baby Boomers account for many of the new sellers in the market. In the same survey, more than 78 percent of business brokers attributed at least a quarter of their closed transactions to Baby Boomer sellers.

Insight Report data supports the belief that small businesses are performing at a higher level. The median revenue of small businesses sold grew from $405,905 to $417,562 in 2014, and the median cash flow rose from $97,000 to $100,000.

Improving financials gave sellers more leverage during the sales process, leading to a slight uptick in median sales price as well, from $180,000 in 2013 to $185,000 in 2014. Financial multiples grew modestly as the average revenue multiple rose from 0.59 to 0.61 and the average cash flow multiple moved from 2.21 to 2.24. This indicates that while sellers are getting slightly higher returns out of their businesses, buyers continue to receive good value on their purchases.

Q4 2014 the economic data for 1,778 New Jersey-area businesses listed at BizBuySell.com highlights include:

o  To buy a business in New Jersey, the current median asking price of businesses for sale is $269,500.

o  One year ago, at the end of Q4 2013, the median asking price for businesses in New Jersey was $250,000.

o  The Q4 2014 listed businesses in the New Jersey area had a median revenue of $446,400, up from $418,500 at this same time last year.

o  The median cash flow, meaning the money that comes out of the business over the course of a year, is $108,227, versus median cash flows of $106,000 last year.

These metrics are based on businesses that are listed by local business brokers, as well as “for sale by owner” (FSBO) listings that have been listed by the business owner without the assistance of a business broker.

“It was great to see the transaction surge from 2013 carry over and even swell in 2014,” Bob House, Group GM of BizBuySell.com and BizQuest.com, said. “Small businesses continue to grow healthier, giving sellers confidence that they can receive a good exit price and buyers optimism that they are receiving a sustainable business. The result is a market with many successful transactions for both sides.”

 

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