More good news for small businesses, as sale prices continued to rise and the volume of closed transactions improved significantly for the third straight quarter.
According to BizBuySell’s Insight Report, small business transactions jumped 41.7 percent in the third quarter of 2013, compared to the like period of 2012. Both the restaurant and retail categories led the charge, with restaurant transactions increasing 109.4 percent and retail deals rising 60.9 percent. In total, 1,685 closed transactions were reported in Q3 2013, a significant spike over the 1,189 transactions recorded in Q3 of 2012. It’s the third straight quarter that sales have been on the rise.
What’s behind the spike? For one thing, the economic recovery has continued to take hold. That’s led more baby boomer business owners, who have been sitting on the sidelines in a soft market, to list their companies. Would-be buyers also have reentered the market, thanks to newfound economic confidence. Additionally, with home and stock values up and capital access finally improving, buyers are better able to make the down-payment and secure the loan needed to buy a business.
As the overall economy has improved, so has small-business health. BizBuySell’s third quarter data show that median revenue jumped to $420,000, an 8.9 percent increase over the $385,327 in Q3 2012 and a 6.7 percent increase over the $393,700 median revenue in Q2 2013. Cash flow experienced similar growth, increasing 5.4 percent to $98,034 from $93,000 in Q2 2013 and 3.4 percent from $94,880 in Q3 2012.
Price tags reflect this. The median asking price for businesses sold in Q3 was $199,000, a 2.1 percent increase over Q2 2013; the median sale price rose 2.9 percent from to $180,000. However, buyers are getting a great deal, too, as cash flow and revenue multiples remain at historic lows. How is this possible? The answer is simple: over the past few years, small business financial performance has risen more quickly than selling prices.