According to BizBuySell.com, one of the Internet’s largest business-for-sale marketplace, a record number of businesses changed hands in the second quarter of 2017. The full results are included in BizBuySell’s Q2 2017 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide. Additional highlights of the report include…
Statistics show a 31 percent increase from this time last year. If this pace holds up, 2017 will easily surpass 2016, when BizBuySell reported a then record 3,775 transactions in the first half of the year.
Businesses sold in Q2 grossed a median revenue of $490,000, an 11 percent increase from $441,331 in the second quarter of 2016. Median cash flow also increased 10.5 percent year-over-year to $116,000 from $105,000. Both figures, however, mark a slight fall from Q1 2017 when median revenue and median cash flow hit record levels at $518,159 and $117,275, respectively. At the same time, the average multiple of cash flow increased 5.1 percent year-over-year to 2.34, while the average multiple of revenue remained steady at .62.
In addition to more transactions taking place, it appears the sellers of those businesses are also benefiting from today’s market, which shows increasing sale prices and faster deals.
Improving financials continue to allow sellers to demand more for their businesses. Despite higher asking prices, sales are closing at a faster pace. These seller friendly conditions are happening despite an increase in competition as total listings increased 13 percent from last year, continuing a multi-year trend since 2012. For owners thinking about exiting their business, the data suggests now is a good time to act. Owners that can show improving financials will find interested buyers and gain more leverage at the bargaining table.
Looking into specific industries, the restaurant sector experienced major growth in the second quarter. Franchises are also increasingly seen as desirable acquisition targets. Established operating franchises for sale comprised 7 percent of active listings and 9 percent of closed deals in the second quarter of 2017. The average cash flow multiple for franchises was 2.44, compared to 2.34 for all transactions. Franchises also reported higher revenues compared to the median of all businesses, despite comparable sale prices. This data suggests that despite royalties, established franchises for sale offer additional revenue and marketing benefits, at sale prices comparable to non-franchises.
While sale prices rose across the U.S., they rose most dramatically in the Northeast. Perhaps unsurprisingly, the most expensive market in the U.S. to buy a business is the New York City metro area. This is followed in order by Philadelphia, Denver, Atlanta and Chicago.
As we move into the second half of 2017, all signs point to continued growth in the business-for-sale market. Small business buyers and sellers should keep a close watch on regulations like health care and tax reform as well as global market conditions, and determine if these changes could affect their exit or acquisition strategies.
You can find the full report at: