Small-business owners, time to rejoice: The seller's market looks like it's finally heating up after three years of steady growth.
According to BizBuySell.com, one of the largest online business-for-sale marketplaces, small-business transactions jumped 41.7 percent in the third quarter of 2013 as compared with the same period of 2012. During this year's third quarter, 1,685 businesses closed deals, up from 1,189 transactions recorded in the third quarter of 2012.
Restaurants and retail stores are leading the way in number of transactions, with a 109.4 percent increase in restaurant transactions and a 60.9 percent increase in retail, compared with the same time last year.
A strengthening economy is to thank as the U.S. emerges from the Great Recession, the lingering effects of which have continued to punish businesses since 2008--now both seller and buyer confidence is on the rise. According to the BizBuySell's Buyer and Seller Confidence Survey, 70 percent of small-business owners expect to sell their business within one year. What's more, as BizBuySell points out, an aging generation of business owners is also to thank, particularly Baby Boomers (those born between 1946 and 1964). As this generation starts to retire, a huge swath of business owners are looking to cash in their chips.
As for business buyers, a climbing economy and an increase in overall personal wealth have bolstered buyer confidence. During the third quarter of 2013, buyer confidence has shot up: 88 percent of potential buyers are now ready to buy a small business in the next one to two years, the study found.
Small-business loans are also on the rise, freeing up capital to finance these transactions. According to The Wall Street Journal, the U.S. Small Business Administration backed a total of $5.3 billion in small-business loans the third quarter, up from $4.3 billion in the same period last year.
Overall small-business health has continued to improve. According to the study, median revenue jumped to $420,000 in the third quarter of 2013 from $385,327 in the same period in 2012, showing an 8.9 percent increase. Cash flow increased to $98,034 from $93,000 in the second quarter of 2012--a solid 5.4 percent quarter-over-quarter and a 3.4 percent year-over-year from $94,880 in the third quarter of 2012.
Asking prices from sellers has also increased: The median asking price for businesses sold in the third quarter bumped up 2.1 percent to $199,000 and the median sale price rose 2.9 percent from Q2 to $180,000.
Andy Cagnetta, chief executive of brokerage firm Transworld Business Advisors in Florida, told The Wall Street Journal that small business owners who waited to sell until the market improved are jumping on the opportunity: "People who wanted to retire and feel like they missed the boat are absolutely seeing their businesses come back to the point where they're saying they're not going to miss it this time."