As the economy recovers, business brokers are optimistic that both buyers and sellers will be more aggressive in the business-for-sale marketplace.
According to a recent study conducted by BizBuySell.com, the Internet's largest online marketplace for buying and selling businesses, brokers said they are currently seeing an increase in the number of deals being completed, compared to the same time in 2012. Now that the presidential election and worries about the "fiscal cliff" are behind us, buyers and sellers are spending less time waiting for Washington and more time being proactive in the marketplace.
There has been a latent supply of buyers and sellers waiting for the right time to enter the market for a long time now. 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.
Brokers Are Optimistic
Although there have already been vast improvements within the marketplace, the feeling among brokers is that the remainder of 2013 will be even more successful. In the survey, 54 percent of brokers expect slight to significant improvements going forward, while a mere 13 percent expect no change from the current activity this year.
Perhaps even more telling was the brokers' long-term optimism. When asked when they expect business transaction volumes to return to pre-recession levels, 44.6 percent answered within the next 24 months while 38.1 said in more than two years. This is a significantly more optimistic view than brokers had just five months ago when a similar survey showed just 29 percent of brokers expected a return to pre-recession levels within 24 months and a majority, 56.4 percent, said it would take more than two years.
Tax Changes May Present Hurdles
One issue nearly all brokers agreed on was the effect 2013 tax changes are having on small businesses. Over 91 percent of broker respondents reported that tax changes are either slightly or greatly deflating small business values.
As a result, owners are forced to accept lower sales prices. But this also means more transactions as buyers hope to land a price they find satisfactory. In fact, a little more than a quarter of brokers in the survey said they expect more transactions in 2013 as a result of sellers' expectations becoming more realistic, improving sales prices.
Uncertainty about tax changes is also leading many business owners to sell now rather than risking the possibility of even more detrimental tax changes in the future.
National debt and ongoing political gridlocks are the factors brokers seem to think pose the greatest threat to economic recovery. But despite those factors, brokers are increasingly optimistic about the vitality of the business-for-sale marketplace for the near future.
CURTIS KROEKER is group general manager for BizBuySell.com and BizQuest.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces. BizBuySell.com currently has more than 910,000 monthly visits. @BizBuySell