With unemployment at record high levels, and SBA lending loosening beginning in Q4, this decrease in pricing and valuation numbers has made the prospect of purchasing a business much more achievable to buyers.
San Francisco, CA (PRWEB) October 6, 2009
BizBuySell.com -- the Internet's largest marketplace for buying or selling a small business -- today released economic data for the third quarter of 2009.
After multiple quarters of declining business-for-sale transactions, the new numbers suggest that the state of the small business economy is finally beginning to improve.
BizBuySell.com's new Third Quarter 2009 Insight Report shows a 24% year-over-year drop in closed small business transactions. While still lagging behind year-ago transaction numbers, BizBuySell.com's previous report -- which included data for the second quarter of 2009 -- showed a dramatic 50% decline in closed business-for-sale transactions when compared to the same time period in 2008. Closed transactions are reported to BizBuySell.com by business brokers nationwide.
BizBuySell.com's quarter-over-quarter data also supports the rebound in the business-for-sale marketplace. The number of closed transactions reported in the third quarter increased by 7.4% as compared to second quarter transactions. Just one year earlier, when the recession was hitting its stride, that same quarter-over-quarter statistic dropped 30%.
"After many bleak months for the small business-for-sale economy, the market seems to have hit bottom and is fortunately now beginning to turn around," says Mike Handelsman, General Manager of BizBuySell.com. "As credit eases, business fundamentals recover and SBA lending criteria change with respect to goodwill, we are optimistic that the fourth quarter of this year and the first quarter of 2010 will show increased signs of recovery and growth."
Closed Transactions Increase as Pricing Drops
BizBuySell.com's third quarter data suggests that business sellers are dropping their prices, which is making it possible for more deals to close. For example, the median sale price for closed transactions fell to $149,000 from $189,500 year-over-year, a 21.4% decline in price.
The metrics used to value companies have seen a similarly dramatic downward trend. Revenue multiples on reported closed transactions dropped 9.6% to .62 in the third quarter of 2009, and cash flow multiples dropped to 2.44, a 12.2% year-over-year 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.
"These year-over-year price declines are dramatic, and suggest there are good deals out there for potential business buyers," says Handelsman. "With unemployment at record high levels, and SBA lending loosening beginning in Q4, this decrease in pricing and valuation numbers has made the prospect of purchasing a business much more achievable to buyers."
Business Brokers Optimistic About Business-for-Sale Transactions
A recent BizBuySell.com survey of business brokers around the country similarly revealed that they are positive about the future of small business transactions:
--- 34% of business brokers reported expecting to close their next deal within the next few weeks.
--- 75% of survey respondents expect to close their next small business transaction within the next three months.
--- 47% of survey respondents believe small business transaction levels will not fall any further than they were during the second quarter of 2009, which leads 78% of survey respondents to believe that business-for-sale transactions will begin to increase again before Q2 2010.
BizBuySell.com is the Internet's 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.com currently has an inventory of over 47,000 businesses for sale, and more than 700,000 monthly visits. BizBuySell.com also has one of the largest databases of sale comparables for recently sold businesses and one of the industry's leading franchise directories.
BizBuySell.com 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 http://www.bizbuysell.com.