If you sold your small business in 2014, it appears you had plenty of company. After an already active 2013, 2014 small business transactions increased again as the business-for-sale market continues its impressive run of growth.
In fact, according to BizBuySell's Insight Report, small business transactions reached record levels in 2014 as brokers reported the highest number of businesses changing hands since BizBuySell started tracking data in 2007. A total of 7,494 closed transactions were reported in 2014, an increase of over six percent from the 7,056 transactions in 2013, which was the previous record. This marks the second straight year of such strong activity after several slow years during and immediately following the recession. On average, 2013 and 2014 transaction totals are up 55 percent over the recession and recovery period from 2010 through 2012. Much of this growth can be credited to Baby Boomers who are reaching retirement age and ready to pass the torch on their life's work. In fact, in our December survey of business brokers, 78 percent of brokers attributed at least a quarter of their 2014 closed transactions to Baby Boomer sellers.
Another important driver of growth is the general improvement of the small business environment. Data shows that small businesses are performing at a higher level, giving sellers confidence that they can receive an acceptable exit price and buyers optimism that they are receiving a sustainable business. According to the 2014 report, both median revenue and median cash flow of businesses sold in 2014 increased from 2013. Those improving financial figures also allowed sellers to earn a more successful exit as the median sale price of sold small business rose slightly from $180,000 in 2013 to $185,000 in 2014.
The data also pointed to a strong fourth quarter of 2014, specifically in regard to small business financial performance. In fact, Q4 of 2014 marked the third consecutive quarter of increased median revenue, topping out at $445,146, while the median cash flow hit $103,829. Again, these improved financials allowed sellers to both ask for and receive more money for their businesses. The median asking price for a small business grew to $224,990 in Q4 2014 after sitting around the $200,000 mark for much of 2013 and early 2014. Asking for more money appears to pay off as the Q4 median sale price stands at $200,000, a strong increase from both Q4 of 2013 ($175,00) and Q3 of 2014 ($189,000).
While 2014 in its entirety was a great boost to the small business transaction market, it's good economic indicator that the fourth quarter ended the year on such a high note. The improving financials are a particularly strong positive for the business-for-sale market and small businesses overall in 2015. There still appears to be strong supply and demand in the pipeline. As the economy continues to grow, small business financials are likely to keep improving, and more sellers will be confident that they can successfully exit their businesses.
Business brokers agreed in our December survey as 82 percent said they expect transaction activity to grow in 2015 and more than 45 percent believe final small business sale prices will increase compared to just 12 who believe they will decrease. In all, the fundamentals signal another strong market in 2015.