An increased number of small business owners are cashing out and getting record sales prices on their exit plans, according to BizBuySell.com’s latest quarterly Insight Report.
The BizBuySell Insight Report is a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. It focuses on sales and listing prices of owner-operated small businesses in over 70 major markets across the United States with less than $2 million in sales.
Each quarter, BizBuySell, one of the largest online business-for-sale marketplaces, analyzes data on sales and listing prices of approximately 45,000 small businesses listed for sale on its site and those recently sold in the year. It then publishes the findings in its quarterly Insight Report.
The latest Insight Report shows that the number of businesses listed for sale grew more than 6.4 percent in Q1 of 2016, making it the highest number of businesses listed for sale on BizBuySell.com since the first quarter of 2009.
Moreover, the median asking price for small businesses listed for sale rose 11 percent in the past year to $249,500. The median sale price increased 10 percent year-over-year from $200,000 to $220,000, the company said in its report.
According to BizBuySell, those businesses that sold in Q1 of 2016 had the highest median revenues and cash flows in its records. The median revenue of sold businesses in Q1 of 2016 was $478,000 compared to $442,000 last year, and the median cash flow in Q1 of 2016 was $110,000 compared to $104,000.
These strong financials and sale prices may encourage more small business owners to cash out.
Why Now May Be the Right Time to Cash Out
The high volume of activity in the business-for-sale market revealed in the BizBuySell Insight Report can be attributed to a variety of factors, including improved lending options and a strengthening U.S. economy.
Other variables are also playing a role in attracting both buyers and sellers to the marketplace:
- First, Baby Boomers are supplying the market with quality listings of small businesses for sale as they reach retirement age.
- Secondly, many small businesses are reporting stronger financials, meaning buyers are more confident about purchasing and are even willing to pay more for healthy businesses.
Now with improved borrowing conditions and greater access to funding for prospective buyers, your businesses’ solid financial condition and documentations showing a healthy growth trend may be your cue that conditions are right to cash out.This is especially true if you have a small business in the retail, restaurant or service industries and have been looking to sell the business, BizBuySell says.