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Transitioning Military Veterans - Sales price of small businesses tumbles in Q2

Posted by Michael Horn on Fri, Sep 02, 2016 @ 08:48 AM

It is important for veterans and transitioning military to understand their local entrepreneurship market. Just a little research provides you with the information that you need when you plan on buying a business. Buying a business is one of the three ways to become an entrepreneur that we discuss in class-Entrepreneurship for Transitioning Warriors. This article by Urvaksh Karkaria at the Atlanta Business Chronicle descibes the current trend in the Atlanta Metro Area. This is great detail that veterans and transitioning miltary should use when deciding whether to buy an existing business or start a new one.

Karkaria writes---It was a sluggish early summer in metro Atlanta’s small business transaction market, even as asking prices for small business in the region outstripped the nation.

The median selling price of small businesses sold in metro Atlanta tumbled 25 percent in the second quarter, versus a year ago, according to online business-for-sale marketplace BizBuySell.com.

According to an analysis of 64 closed transactions in metro Atlanta by BizBuySell, businesses sold for a median price of $165,000 in the second quarter, compared with $220,000 a year ago.

Businesses that sold in Q2 had a median annual revenue of $450,000, compared with $331,214 last year.

Metro Atlanta led the nation in businesses with the highest asking price in the second quarter. The median asking price in metro Atlanta was $279,500, besting the New York, Philadelphia, Washington and Chicago areas.

“Atlanta and the Southeast in general have an advanced small business development atmosphere,” said Bob House, president of BizBuySell.com and BizQuest.com. “Atlanta is headquarters to many franchises and franchise development (the sale and resale of franchises) companies.”

As revenues and cash flow increase, business owners nationally are growing more confident about raising asking prices, House said. That may be causing deals to take longer to get done. Small businesses sold in Q2 reported a median of 178 days on market, a slight improvement from the 188 days in the previous quarter, but an 8 percent uptick from the prior year’s 163 days, according to BizBuySell.

Transactions are taking longer to get to the closing table, regardless of deal size, Atlanta business broker Sara Burden said. “The banking industry is much more stringent than ever before in letting loans, and many will string a buyer along until the end and then refuse to do the loan,” said Burden, CEO with Walden Businesses Inc.

Now Walden refer buyers to a vetted group of bankers who. Burden said, “we know will be totally honest from the outset, and will explain to a buyer exactly what is required of them on day one.”

Despite the lethargic lending situation, Burden said she is seeing strong businesses come into the market as more owners are exiting due to retirement. “It is comforting, too, to see that a number of the owners want to remain involved for a year or two post-closing, so they can assist a buyer with a successful transition,” Burden said. “It’s a good time to be selling, and a great time to be buying.”

BY THE NUMBERS

The median selling price of small businesses sold in metro Atlanta tumbled 25 percent in the second quarter, compared with a year ago.

  • Median sale price: $165,000
  • Median annual revenue: $450,000
  • Median cash flow; $90,000

Topics: Veteran, Entrepreneurs, Vets, Entrepreneurship, Small Business, Buying