Here is another great business article by Urvaksh Karkaria of the Atlanta Business Chronicle. Even though this is in the Atlanta market, the news is applicable nationwide. Buying an existing business is an excellent opportunity for veterans pursuing entrepreneurship. With an existing business there are obvious advantages over starting a new business. There are, of course, disadvantages as we discuss in class.
Karkaria writes--The median selling price of small businesses sold in metro Atlanta in the first quarter tumbled 25 percent from a year ago, according to new data from the online business- for-sale marketplace BizBuySell.com. Annual median revenue of those sold businesses also declined by more than 21 percent, compared with the prior year.
According to an analysis of 63 closed transactions in metro Atlanta reported to BizBuySell by business brokers, businesses sold for a median price of $175,000 in the first quarter. The businesses that sold in the first quarter had a median annual revenue of $430,000, compared with annual revenues of about $550,000 during the same
period a year ago. The price the buyer paid as a multiple of the company's revenue in the Atlanta market fell about 20 percent in the first quarter. The cash flow multiple fell nearly 26 percent.
Across the United States, the picture was brighter. Businesses that sold in Q1 had a median sale price of $200,000, up from $175,000 at the same time last year. Median revenue of businesses that sold in Q1 was $442,000, up from an even $400,000 at the same time last year.
Nationally, an improving economy is strengthening the health of businesses as seen by rising revenues and cash flow, House said. "That's translating into higher asking prices, " House said. "Valuations are also edging up slightly."
The volume of transactions completed was consistent between Q1 2014 Q1 2015, according to Atlanta-based business broker Walden Businesses Inc. Transaction prices were "only slightly improved" during first quarter 2015 over the same period for 2014, President Sara Burden said.
"Our buyers tend to come from all over the country and the winter storms affected several buyer groups traveling here to meet with our clients," she said. "Those meetings are happening now that the weather has improved."
Business broker Dave Chambless talks about increased confidence on both sides of the table. "Business owners are 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 that the economic conditions of both the macro- and micro-markets of their targeted businesses will provide a fertile environment for the success of the businesses. "
Lending for business-acquisition purposes, however, continues to be the key impediment to the market. "Lenders have money, and they say they are lending," Chambless said. "What they don't talk about is the circumstances under which they will loan: and, those circumstances do not often include business acquisitions.”