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While the large jump in small-business transactions is a positive sign for the future, some uncertainty exists regarding the remainder of 2013, according to the latest report from Web-based business-for-sale marketplace BizBuySell.
Small-business sales increased 56 percent in the first quarter of 2013 compared with the first quarter of 2012, the survey found. In total, 1,897 closed transactions were reported in the first quarter of 2013, a “dramatic” bump over the 1,218 recorded in the same period of 2012. The figure, which represents the highest number of businesses sold in a quarter since the second quarter of 2008, is also the largest such increase since small-business sales bottomed out in mid-2008.
“Since the economic downturn in 2008, we’ve been waiting for a time when buyers and sellers finally felt ready to re-enter the business-for-sale market,” Curtis Kroeker, group general manager of BizBuySell and BizQuest, said in a statement. “The continued strengthening of business performance, the resolution of the uncertainty of both the presidential election and (to a large degree) the fiscal cliff, and the strong stock market appear to be creating such an environment.”
Business brokers were cautiously optimistic in the survey, with 54.2 percent of brokers expecting slight to significant improvement going forward, and another 13.4 percent said they expected no change from the current activity level. When asked what factor is most endangering economic recovery, 31.8 percent cited the national debt and ongoing political gridlock. Small-business and personal tax rates came in second, cited by 17.5 percent of respondents, while both small-business health care costs and ongoing long-term unemployment received 12.3 percent of votes each.
“A number of factors appeared to have fueled a spike in business sales this quarter,” Kroeker continued. “We expect small-business health to continue to improve. However, time will tell if it will result in high transaction volumes for the rest of the year or if the market will return to the slow but steady road to recovery we saw in 2012.”
As the stock market and overall economy have improved, so have the financials of small businesses across the country. The improved financial health of small businesses is enabling sellers to ask for more money from buyers. The report revealed the median asking price for businesses sold in the first quarter was $199,000, a 10.6 percent increase over the first quarter of 2012.
Issued quarterly, the company’s Insights Report includes information on how business successions fared in the fourth quarter of 2012 and for the full calendar year for 2012. The report is based on listed businesses and by reports from business brokers on completed sales. In the final three weeks of December, small-business sales climbed 43.4 percent over the same period in 2011, and the report noted it is likely that many additional deals carried over to the first quarter of 2013.
“Small-business financial indicators have been on the rise for some time now, and with many of the metrics reaching levels not seen since the 2008/2009 downturn, there is little doubt the improved health is helping push the jump in small-business exit transactions,” Kroeker concluded. “Hopefully this trend continues increasing owner confidence that they can get a good sale price and buyers excitement to join an improving small-business market.”