According to a recent BizBuySell.com report, there was continued strong business-for-sale activity in the first quarter of 2018, with record-breaking sales prices and transactions, highlighting a positive start to the new year for small business sales.
Small businesses sold for a median sale price of $245,000 in the first quarter of 2018, the highest sale price since BizBuySell started tracking the data in 2007, and a 3.4% increase from a year ago. The median asking price of sold businesses also hit a record high at $262,000, a 4.8% increase from 2017.
- 2,678 businesses sold in the first quarter of 2018, representing a 13.1% increase from this time last year and the most businesses reported as sold in a quarter since BizBuySell began collecting this data.
- Businesses placed on the market also increased in the first quarter, up 6.9%.
- The restaurant and manufacturing industries experienced the most growth in first quarter activity with transactions increasing 7.6% and 9.3% respectively versus the same time last year.
- While the “Amazon Effect” continues to lurk, the number of retail businesses sold increased 2.5% year-over-year accompanied by a near 3% increase in median sale price.
While business owners are getting more for their businesses, the report cautions that this does not necessarily indicate a sellers' market. Even though buyers are willing to pay higher prices for business, the report indicates these sales may be due to the financial stability of these businesses and their growth potential. The report further notes that the new business listings in the first quarter are also financially stable, with strong growth. And, it suggests there are still lots of healthy businesses available for buyers and that Baby Boomers will continue capitalizing on favorable market conditions, selling in large numbers and retiring.
The Bottom Line:
According to Bob House, president of BizBuySell.com, "If 2017 was a year of unprecedented growth in small business transactions, 2018 will be about sustaining that momentum." Keeping that sentiment in mind, in addition to the increasing number of businesses going on the market, it may indicate that we are at the beginning of hitting a market plateau. Business owners who are thinking about selling in the near future need to aggressively plan in order to take advantage of the current market environment, including shoring up their businesses, increasing value, and boosting growth potential.
If you’re a business owner, now is the time for you to take the necessary steps to exit your business and improve their chances of reaching their goals. Or, you might miss out!
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Our mission is to assist the owners of privately held companies in making key transition decisions that impact their future as well as the future of their businesses, families, and employees.
As a business owner and co-founder of BTA, Jane Johnson recognized the need to educate business owners about the importance of planning ownership transitions to achieve their goals and ensure business continuity. The challenges Jane experienced with selling her own business inspired her to co-author the book Cashing Out of Your Business – Your Last Great Deal and develop tools and resources to inform and empower other owners to plan and execute successful ownership transitions.
Jane and her team of Business Transition Mentors also offer business transition advisory services to companies with annual revenues of more than $5 million.