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BTA Market Pulse: Q2 Small Business Sale Transactions Down Slightly, but Still at Historically High Levels

Posted by Jane Johnson on Tue, Jul, 30, 2019 @ 04:13 PM

Business Transition Market Pulse_crop

The Details:

Q2ClosedTransactionsBizBuySell.com's Second Quarter 2019 Insight Report shows a dip in small business transactions when compared to last year, but growing financials and record sale prices continue to show signs of a strong market. With 4,948 transactions reported in the first half of 2019, this year could be on pace to become the second most active business-for-sale market since BizBuySell started tracking data in 2007 – trailing only 2018’s record-setting levels.

Key Takeaways:

  • While the 2,444 transactions reported in Q2 represent a 9.6% dip from the same time last year, it’s important to note that Q2 still ranks among the most active quarters over the last decade.
  • More brokers reported sales in Q2 of 2019 than in the same quarter of 2018, however the average number of deals reported per broker declined. The report partially attributes the slight slowdown to uncertainty related to political policies. Specifically, questions around the true impact of tariffs between the U.S. and China, and the potential for additional international tariffs to enter the fold.
  • The overall health of the small business market appears strong with strong growth in the financials of businesses sold in the second quarter.
    • The median revenue of sold businesses rose 14.3% to $601,380, the highest mark on record. Much of that growth can be attributed to the retail and service industries, where the median revenue increased 20% and 17% respectively compared to Q2 2018.

"The data shows that even with economic uncertainty, 2019 remains a great time to buy or sell a small business," said Bob House, President of BizBuySell.com and BizQuest.com. "There are still a growing inventory of businesses hitting the market, and financially, these businesses are performing better than ever. The ongoing tariff discussions will certainly be concerning to some buyers and are something to watch in the coming months, but based on what we’ve seen, there is still much value to be had in today’s market."

Similarly, a recent survey released by Pepperdine University’s Graziadio School of Business reported that 83% of its survey participants said the strong M&A market will be over within two years.

The Pepperdine survey found that baby boomer retirement is still the primary reason why businesses are going on the market. According to the survey, which broke sales down according to company size, found that

  • 80% of owners of companies priced in the $1 million to $2 million range were heading for retirement.
  • 42% of companies priced in the $500,000 to $1 million range were retiring.
  • 31% of those whose companies sold for up to $500,000.

The Bottom Line:

While all signs are still pointing to a healthy small business market at least for the near future, economists have raised concerns that the economy will weaken this year, which may be prompting some owners to retire sooner rather than later. “People are thinking about getting out, before the next recession,” said Laura Ward, managing partner of M&A advisory firm Kingsbridge Capital Partners, who was quoted in the Pepperdine survey.

If you are thinking about retiring in the next 5 years, you should start planning now or risk missing your window of opportunity! Now is the perfect time to prepare for your future, develop your Business Ownership Transition Plan, and take advantage of current strong market conditions to extract as much value as possible from the business you’ve worked so hard to build!

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