Sales of small businesses with revenues of about $350,000 rose eight percent in the second quarter of 2011 over the same period last year, but the news isn’t quite as good as it sounds.
Although sales of businesses have hit the highest level since the end of 2008, a lot of sales are because owners are accepting that their businesses aren’t worth what they once were.
Buyers paid a median of $25,000 below asking prices, according to data from BizBuySell.com, a San Francisco-based online small-business marketplace. The median sale price was about $150,000, the same as last year. The median revenue of the businesses sold dropped by six percent, going from $361,274 last year to $340,000 this year.
Deals for a lot of the businesses being sold today center on the seller financing a big chunk of the price, too.
Earlier this month, BizBuySell.com general manager Mike Handelsman told the Boston Business Journal, "It’s almost impossible to sell without providing some of your own capital."
Of the upward trend in the business-for-sale market, Handelsman said in a statement that the company had been anticipating it "as more profitable businesses start to become available for sale." After focusing on survival during the downturn, efforts to improve performance by small-business owners eager to sell have "begun to pay off," he said.
In addition, there is competition among buyers for businesses.
"Unemployment nationwide is still relatively high. There are people who want to get back into the corporate world, but can’t. Those people are looking to the small-business market to create a job for themselves and create income for their family," Handelsman said.
Most of the small businesses sold were in the service sector, with 45 percent; followed by retail, with 26 percent; retail/restaurant, with 18 percent; "other" businesses, with 7 percent; and manufacturing, with 5 percent.