The sale of small businesses in the first quarter of 2015 increased 6 percent over the same quarter last year, according to BizBuySell’s quarterly Insight Report.
The report analyzes the listing and sale prices of approximately 45,000 businesses for sale in the U.S.
Businesses that sold during the period benefited from increasing financial indicators, including the highest reported median cash flow since BizBuySell started tracking data in 2007.
A total of 1,830 small businesses were reported sold in the first quarter, continuing a two-year trend of exceptionally robust activity in the business-for-sale market, according to BizBuySell.
“The cash flow of a business is indicative of its overall financial health. Increased revenue, and the resulting growth in cash flow, allows small business owners to reinvest that money back into the business. This, in turn, helps raise the overall value of the business,” Bob House, group general manager of BizBuySell.com and BizQuest.com, told eWEEK. “When sellers can show improving revenue and cash flow numbers in the financial documentation, it allows them to both ask for and receive more money during an exit.”
House said the high cash flow volumes for 2015 indicate that small businesses are growing healthier. The median revenue of small businesses sold in the first quarter this year was $442,000, up from an even $400,000 during the same period last year.
The median asking price of a small business in the first quarter of 2015 was $225,000, a significant jump from the $199,000 median asking price recorded a year ago.
The median sale price in the first quarter of 2015 was $200,000, a marked increase from the $175,000 median sale price in the first quarter of 2014. The 2015 figure is consistent with higher sale prices seen in the final quarter of 2014, the report noted.
“The continuation of more Baby Boomers supplying the market with healthy listings, combined with the increase of qualified buyers, will likely help the small businesses transaction market stay strong throughout the rest of 2015,” House explained. “We’ve seen more financing options open for potential buyers, which makes the business-for-sale marketplace more competitive and helps increase the overall asking and sale price.”
House also noted that lower fuel prices decrease overall business operating expenses by reducing shipping expenses and the cost of raw materials.
This, in turn, increases business cash flow and allows business owners to reinvest money back into the business.
“At the same time, lower gas prices also suggest consumers have more disposable income that they can spend at nearby small businesses,” House said. “In general, increased consumer confidence in the economy drives consumer spending. Also, rising stock prices, recent wage growth and the improving housing market are giving consumers more disposable income that they can spend at their local small businesses.”