Here is another great article by Urvaksh Karkaria of the Atlanta Business Cronicle. This is a good sign for anyone considering buying a business. There is a continuing market of available businesses throughout the country. Anyone considering starting a business would be wise to determine if an existing business is available in their market. Read on to learn more.
The median selling price of small businesses sold in metro Atlanta tumbled by a third in the second quarter, compared with a year ago, according to new data from online business-for-sale marketplace BizBuySell.com. Yet, the median revenue of businesses sold in the second quarter rose by nearly 32 percent from a year ago.
According to an analysis of 48 closed transactions in metro Atlanta by BizBuySell, businesses sold for a median price of $218,500 in the second quarter, compared with $289,000 a year ago. Those businesses had a median annual revenue of $575,490.
The price the buyer paid as a multiple of the company’s revenue in the Atlanta market fell 29 percent in the second quarter versus a year ago. The cash flow multiple fell 18.8 percent, year-over-year. However, this appears to be driven primarily by very strong multiples in the second quarter of 2013, said Curtis Kroeker, group general manager for BizBuySell.com and BizQuest.com. Compared with the nation at large, multiples in the Atlanta region remain strong.
Across the United States, brokers reported 2,029 closed deals to BizBuySell in the second quarter, up from 1,827 deals from the same time last year. Those businesses sold for a median price of $178,500, up from $175,000 a year ago.
Nationally, Q2 was the strongest quarter in the number of business transactions since the second quarter of 2008. Sale prices relative to revenue and cash flow remains low.
“It continues to be a good market to be a seller because there’s a lot of good activity,” Kroeker said. “But it’s a great market to be a buyer, because your buying dollar goes a bit further.”
Improving business performance, driven by a strengthening economy, is bringing business sellers and buyers back into the market. “Depressed business transaction levels for the four years of the recession has created pent-up supply and demand,” Kroeker said.
Kroeker is optimistic the small-business market will maintain its growth momentum — a sentiment backed up by a May survey of business brokers. More than 70 percent of brokers surveyed said they expect to get more deals done in the second half of the year, compared with the first half.
Increased confidence among buyers and sellers is driving the small-business transaction market, said David Chambless, CEO of business broker Abraxas Business Services Inc.
“Business owners are increasingly confident that they can, indeed, sell their businesses for prices that satisfactorily compensate themselves for their years of investments in their businesses,” Chambless said. “Buyers are increasingly confident economic conditions of both the macro- and micromarkets of their targeted businesses will provide a fertile environment for the success of the businesses.”
Lending for business-acquisition purposes continues to be the key impediment to the market, Chambless said. “Lenders have money, and they say they are lending,” he noted. “What they don’t talk about is the circumstances under which they will loan; and those circumstances do not often include business acquisition.”
An improving economy coupled with demographics are expected to maintain growth momentum in 2014 and 2015.
“Economies will continue to strengthen, making buyers more confident about buying, and increases in interest rates will provide investment vehicles for the sellers of businesses,” Chambless said.