New data from BizBuySell’s confidence survey on small business indicates demand for pandemic-proof businesses is on the rise. According to the survey, buyer confidence has reached a new record high of 60 compared to 53 a year ago.
The survey polled over 2,300 small business owners in which 57% believe they can buy a business for a better value than last year. This is a dramatic turn as only 17% believed the same when asked last year. The sentiment is reflected in data from businesses for sale transactions as opportunity seekers and business owners are well-positioned to profit or forced to exit.
Small Business Buyer Confidence at Record High
The 3rd quarter 2020 survey compiled statistics from business-for-sale transactions in which it shows a steady upward trend in sales since the pandemic hit. In April, transactions showed a 51% year over year decline, shrinking the number to 21% in July, and then just 5% fewer deals in September.
Other findings include:
- Owner confidence fell to a low of 45%, down from 52% in 2019 brought about over concerns over business value
- Some 68% of business owners believe they would have received a better value if they had sold their business last year – this is up from 37% in 2019
- Some 71% of business owners point to the impact of the pandemic for the lower values
- Only 20% of businesses are outperforming the period prior to the pandemic.
- The average asking price of businesses currently is $299,000, which is 4.9% higher than a year ago and slightly higher than the $296,000 figure from last quarter.
Business Value During the Pandemic
In a time of limited supply, not only weathering, but thriving during the pandemic, businesses may have a higher price tag, but offer less risk. They also seem to be making returns. They are registering 14% and 8% respective increase in average revenue and cash flow for businesses sold in the 3rd Quarter.
In terms of a sure discount for value, shoppers come for a business asset sale. This is when the buyer is not purchasing an operating business. But instead is acquiring assets in terms of inventory, equipment, supplies, licenses and real estate. Because these are non-operating businesses, they provide a very low-cost entry point.