Small-Business Market Improving in 2013

While brokers had mostly positive feelings toward the business-for-sale market, they did see some hazards along the path to recovery.

Most small-business brokers report an increase in both buyers and sellers on the market, resulting in a greater numbers of transactions, suggesting an improvement in the small-business market in the United States, according to a nationwide survey of business brokers conducted by BizBuySell, a Web-based marketplace for buying or selling small businesses.

While brokers were mostly positive about the business-for-sale market, they did see some hazards along the path to recovery. When asked about the biggest factor endangering economic recovery, 31.8 percent cited national debt and ongoing political gridlock. Small-business and personal tax rates came in second with 17.5 percent of respondents, while both small-business health care costs and ongoing long-term unemployment received 12.3 percent of votes each.

"Overall, there are certainly some hurdles that still need to be jumped, but it's very exciting that brokers are increasingly optimistic about both 2013 and beyond," Curtis Kroeker, general manager of BizBuySell, said in a statement. "With the uncertainty of the presidential election and [the threat of the] fiscal cliff behind us, there is reason to believe buyers and sellers will be more aggressive in the coming months and years."

One issue nearly all brokers agreed on was the effect 2013 tax changes are having on small businesses. Of broker respondents, 76.5 percent believed tax changes are slightly deflating small-business values, and another 14.7 percent said they are greatly deflating values.

The report noted that while this means owners are being forced to accept lower sales prices, brokers believed this would actually help spur more transactions as buyers hope to get in at a good price. In fact, 26.2 percent of brokers that said they expect more transactions in 2013 attributed it to sellers' expectations becoming more realistic, improving sales prices.

"There has been a latent supply of buyers and sellers waiting for the right time to enter the market for a long time now," Kroeker continued. "Owners finally feel their businesses are healthy enough to put on the market, and buyers are finding better lending options to fund their purchases. With the economy improving and stocks at record highs, it isn't surprising to see the market growing more crowded."

Of the thousands of brokers surveyed, 75.2 percent of respondents said they are seeing the same amount of, or more, deals getting done, compared with the same time in 2012. When asked about the main factor causing the increase in business transactions this year, the top answer was an increase in the number of interested buyers (26.8 percent). A close second, with 25.6 percent of brokers, was an increase in the number of owners looking to sell.

While a majority of brokers said they have already seen improvement in the business-for-sale market, they were also optimistic for the remainder of 2013. In total, 54.2 percent of brokers expected slight to significant improvement going forward. Another 13.4 percent expected no change from the current activity in 2013. When asked why brokers felt the market would continue to improve in 2013, 33 percent said they expect an increase in the number of small-business owners looking to sell. Another 17.9 percent said the number of buyers would increase.