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BizBuySell.com Reports Record Decline in Business-for-Sale Transactions

(PRESS RELEASE – San Francisco, CA – July 6, 2009) — BizBuySell.com, the Internet’s largest marketplace for buying or selling a small business, today released economic data for the second quarter of 2009 that suggests small business-for-sale transactions and valuations have continued to decline as a result of the struggling economy.

According to the BizBuySell.com Second Quarter 2009 Insight Report, the number of closed transactions reported to the site in the second quarter of this year decreased by more than 50% as compared to the same time period in 2008, representing the largest year-over-year decrease shown in the data to date. Numbers from BizBuysell.com’s first quarter 2009 report indicated a 36% year-over-year decrease in closed transactions, meaning even fewer deals are being closed as the year goes on. Closed transactions are reported to BizBuySell.com by business brokers nationwide.

“These numbers are not surprising as the economy continues to deter the consummation of business transactions at all levels,” says Mike Handelsman, General Manager of BizBuySell.com.  “There is no doubt that a large number of business transactions are not being closed simply due to the lack of available buyer capital and bank financing.  While there are more potential buyers in the market due to high unemployment levels, they don’t have the capital or the risk-profile they’ve had during better times. To make matters worse, banks just aren’t willing to back business purchase transactions to the same level that they have in the past.”

Popular Business Valuation Metrics Are Down

In addition to fewer completed deals, BizBuySell.com notes a decline in the metrics that are used to value companies. Compared to the same quarter in 2008, both revenue multiples and cash flow multiples have declined.

Revenue multiples on reported closed transactions dropped 2.5% to .68 in the second quarter of 2009.

Similarly, cash flow multiples dropped to 2.59, representing an 8% decrease. The revenue and cash flow multiples are calculated by dividing the selling price of the business by its reported annual revenue or cash flow.

The median sales price for closed transactions also declined year-over-year, from $200,000 to $160,000 – a 20% decrease.

“Now more than ever buyers are being cautious about entering into business transactions,” says Handelsman.  “Many buyers are reluctant to pay the asking price for a business simply out of fear for the business’s ability to survive current market conditions.”

Key Takeaways for Business Sellers and Buyers

While current market conditions are preventing many business-for-sale transactions, some deals are still closing successfully.

BizBuySell.com suggests that buyers and sellers consider the following attributes of closed transactions that have helped those businesses reach a deal:

The BizBuySell.com Second Quarter 2009 Insight Report includes business-for-sale metrics for the total U.S. and for more than 70 major metropolitan areas. Metrics are also available by industry and business type. The current Insight Report comprises data from 1,040 closed transactions and more than 27,150 active listings.

For more information on the BizBuySell.com Second Quarter 2009 Insight Report, visit http://www.bizbuysell.com/news/media_insight.html.

About BizBuySell:

BizBuySell is the Internets largest and most heavily trafficked business for sale marketplace, with more business for sale listings, more unique users, and more search activity than any other service.

BizBuySell currently has an inventory of over 48,000 businesses for sale, and more than 700,000 monthly visits. BizBuySell also has one of the largest databases of sale comparables for recently sold businesses and one of the industry’s leading franchise directories.

BizBuySell was founded in 1996 and acquired by LoopNet, Inc. in 2004. LoopNet operates the largest commercial real estate listing service online, with more than $500 billion of property listed for sale and 5.7 billion square feet of space for lease. With over 3 million members, LoopNet attracts the Internet’s largest community of commercial real estate professionals. For more information, visit www.bizbuysell.com.