The number of small business transactions in 2015 dropped 3.6 percent from 2014’s record high, according to BizBuySell’s 2015 annual and fourth quarter Insight Report.
The small dip in transactions could indicate the large number of business owners delaying to sell during the recession may have now exited the market, and the market is left with a more stable, balanced environment.
The last quarter of 2015 saw 1,683 closed transactions, a decrease from the 1,848 transactions in Q4 of 2014, but the median revenue of sold businesses reached a record $460,467, the highest revenue total since BizBuySell started tracking this data in 2007.
“As business financials continue to improve and sale prices rise, we expect more Baby Boomers to feel confident they can sell at price that will afford them a comfortable retirement,” Bob House, group general manager of BizBuySell and BizQuest, told eWEEK. “While it appears this generation is choosing to work longer than previous ones, at some point we do expect a larger influx of Baby Boomer businesses hitting the market.”
House noted the financial crisis of 2008 and resulting Great Recession derailed many Baby Boomers retirement plans, explaining that some Baby Boomers planned to exit their businesses several years ago but were forced to delay due to the recession driving down prices.
“Many of these owners have invested a significant part of their lives in their companies and at least some of their retirement savings are wrapped up in their businesses,” he said. “Some boomers are continuing to hold off selling because they simply can’t afford to yet.”
House said as business financials continue to improve and sale prices rise, he expects more boomers to start selling their business.
“Of course, it’s also important to consider that some Baby Boomers may be holding off on selling for various other reasons,” he said. “Many Baby Boomers still enjoy the challenge of running a business and aren’t quite ready to let go.”
The median sale price increased a solid 7.6 percent year-over-year, from $185,000 to $199,000, and the median revenue of sold businesses also grew to $449,462, up from $417,562 in 2014. The median cash flow crept up to $102,000 from $100,000 in 2014.
“Both sellers and buyers should keep their eye on the upcoming election, rising health care costs and potential minimum wage hikes to see how it’s affecting business values,” House said. “In fact, a recent survey of business brokers found 20 percent have had a client sell due to higher health care costs and 8 percent have had a client sell due to minimum wage increases. Still, it’s unlikely these events would unhinge what has been an increasingly active business-for-sale environment. Overall, small business indicators point toward a healthy market for 2016.”