Many business owners who have thought about selling are now holding out due to economic uncertainty arising from the pandemic. According to data from BizBuySell, a nationally recognized organization aggregating information on business transactions, there is a steady upward trend in sales since the pandemic that peaked in September. BizBuySell’s 2020 Small Business Confidence Study indicated that buyer confidence reached a record high in the 3rd quarter of the year. This is due to a spike in buyer demand.
What are buyers looking for right now?
Buyers are primarily seeking businesses that have been able to adapt to the pandemic. This includes businesses that were negatively affected and even closed, but now have systems in place to be successful again. Those that are considered “essential” are especially popular because they were able to sustain or even exceed their prior success. The median sale price of businesses like these in the 3rd quarter of 2020 was 20% higher than the year before. Similarly, asking prices were 18% higher. These prices were mostly driven by businesses outperforming the period before the pandemic. According to BizBuySale’s confidence survey, 1 out of 5 businesses fall into this category. Despite their higher price tag, they remain attractive to buyers because they carry less risk and a higher return on investment.
Although pandemic-proof businesses are seeing higher valuations right now, that doesn’t mean others are being left in the dust. Buyers who are unwilling to pay a premium for resilient businesses are looking for opportunities in others that have been impacted by COVID-19. While they might be seeking a discount for these businesses, they are not guaranteed one. Demand is helping to keep prices stable, since supply is fairly low. As a result, data does not show widespread dramatic price reductions. If your business is not necessarily performing as well as it did last year, but you were able to re-open, you may fall into this category, where you may only have to make a small price concession to sell, if any.
All of this sale data points to a good market for business sales right now. Clearly, things don’t look quite as positive for everyone, as some businesses were forced to close permanently during the pandemic. However, owners of those businesses can still take advantages of market conditions right now. Even though they can’t sell for anywhere near as much as they could if they remained open, they could still cash out and recoup some of their losses. Asset sales are very popular right now, especially in the restaurant industry. A seller who needs to unload their equipment or get out of their lease should not have any issues finding an interested investor.
How are specific industries performing?
The positive trend in business sale transactions is good news for all industries. Thirty percent (30%) more restaurants sold in quarter 3 than in quarter 2. This happened while the median sale price stayed stable. This is a good sign for a sector that was hit especially hard by the pandemic. The news is good for other sectors as well, with 35% more service businesses, 50% more retail businesses and twice as many manufacturing businesses selling compared to the previous quarter.
Are businesses in Florida selling right now?
Geographically speaking, business sales in Florida have been some of the strongest in the country. The Tampa metropolitan area has the 3rd highest number of sold businesses in the country for the 3rd quarter of 2020. This trailed only New York and Los Angeles, which is very impressive, considering the comparable sizes of these cities. The Miami metro area ranked 4th in the country. This is a great sign for the rest of Southwest Florida as well. Business owners considering a sale in the Sarasota, Fort Myers and Naples areas stand to benefit from the current market.
What does this mean for selling a business in 2021?
Despite optimism in the market for business sales, many business owners will still be reluctant to put their businesses on the market. Since demand is still high, and the supply of profitable businesses on the market remains low, this is good news for those who decide they are ready to move forward with listing their company for sale. If you decide to sell your business, you will face less competition from other sellers, and possibly close your deal faster than in a typical market.
While every situation is different, market data shows that this is a great time to sell your business. If you own a business in Southwest Florida and are considering selling it in 2021, you should start the process as soon as possible. Contact us at CIBB to find out what your business is worth and discover whether it is worth selling right now or holding out. We offer a free, no obligation consultation to help make your decision easier.
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