A recent survey of the nation’s business brokers on the state of the business-for-sale market has encouraging news for business sellers. The survey was completed by BizBuySell.com, the online marketplace for buying or selling a small business.
76% of responding brokers nationwide anticipate that 2011 will be a good year to sell. A generally positive feeling about economic recovery seems to be the driving factor for the encouraging reports about the business-for-sale market this year. More than two thirds of the brokers – 69% – who anticipate that this year will be a good year to sell a business cite “the economy in general is starting to recover” as driving their bullish outlook. Other top reasons for optimism cited by brokers include “more businesses coming on the market” and “better financing becoming available for business buyers.”
“Business owners who have been sitting on the fence ready to sell for over a year will probably get off the fence and put the business on the market,” explains one responding broker. “While the economy is certainly not great, it is more stable [than it was] was last year.”
Another respondent expects that 2011 will be a good year for the business-for-sale market “because more people are looking to purchase a business. If financing options improve it could be a banner year for sales.”
“We’re hearing that, while the economy certainly isn’t back to what it was, business owners are starting to feel more confident about it, and they’re seeing a reprieve from the recessionary environment we’ve been in over the past few years, Based on our conversations with business sellers, brokers and buyers, we believe that stable businesses with appropriate price expectations will likely receive quality offers from prospective buyers if they come on the market during the next twelve months.”
Various Factors Continuing to Affect the Business-for-Sale Market
According to the survey, a lack of available financing is still the most common factor preventing business transactions from closing, a trend that is continuing from two previous surveys conducted in July and November of 2010. Nearly half of the brokers surveyed, 48%, report financing as the biggest issue hindering business for sale transactions. Seller unwillingness to lower their asking price is an additional issue, with 26% of the brokers surveyed reporting it as a primary factor preventing sales from closing.
However, other outlying factors, such as legislative changes, seem to be having little effect on the business-for-sale market. 62% of the brokers surveyed said that the Small Business Jobs Act has not affected business owners’ desire to sell. “I think many small business owners are still unaware of the changes and how they can benefit from them,” explains one survey respondent. “Many of these people are too busy or burnt out to keep up with the latest information.”
The extension of the favorable long-term capital gains tax rate is having a slight effect on the business-for-sale market in 2011, but will likely be a driving factor for business owners looking to sell within the next few years. 54% of the brokers surveyed noted that the extension will have little effect on the market this year, but as one respondent notes “sellers are unsure of what the rate will be after 2012, so many are positioning a sale within the next two years.”
“As more business owners become aware of the potential capital gains tax rate increase after 2012, we anticipate they may be more inclined to want to sell in the next year or two,” Handelsman notes.
Full Economic Recovery Still Not on the Horizon
While the brokers surveyed are feeling confident about the business-for-sale market in 2011, most respondents still don’t believe business transaction volumes will return to pre-recession levels for at least 18 months. This is again consistent with the two previous broker survey findings. Of the respondents, 66% predict that business transaction volumes won’t return to pre-recessionary levels for at least another 18 months, a slight increase from the 62% of brokers who responded similarly in November, and 53% in July.