The market for buying and selling small businesses is on the rebound, a new study finds.
Research from BizBuySell.com, an online business-for-sale marketplace, shows that transactions in the last three months increased nearly 3 percent from the same period of 2011. In total, brokers reported 1,189 closed transactions between July and September.
The small increase helps offset the 1.6 percent drop in sales recorded in the second quarter of the year and continues the trend of a gradual improvement in the business-for-sale marketplace since numbers bottomed out in 2009.
"Over the past two years we've seen similarly small increases in the business-for-sale market as economic conditions and overall business performance have improved," Mike Handelsman, group general manager of BizBuySell.com and BizQuest.com, said. "This quarter's growth was likely assisted by sellers looking to exit their businesses before the anticipated increase in the capital gains tax rate at the close of 2012."
The study revealed the overall health of small businesses is also improving. For businesses listed on BizBuySell.com, the average cash flow over the past three months was $98,172, an improvement from the $96,000 in the third quarter of 2011. It's the third straight quarter that median cash flow numbers have improved.
The improved health is leading to an increase in sale prices. The research found that the average sale price of closed transactions last quarter was $174,000, nearly $25,000 more than a year ago. The $174,000 represents the highest amount sellers have received in over two years.
"Since the recession hit in 2008, most sellers have been forced to settle for lower than expected sales prices," Handelsman said. "But as their business financials improve, more sellers are more confident and it's paying off in the form of higher sale prices."
Handlesman said the uncertainty surrounding the presidential election and potential tax changes that could come from a change in office is making the outlook on the business-for-sale market cloudy at best.
"With so many macroeconomic factors in play, there will be a lot of uncertainty with both buyers and sellers in the marketplace," Handelsman said. "Overall, however, we expect the business-for-sale market to continue on the same slow yet bumpy road to improvement we've experienced over the past two years."