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Q1 2023 Report Shows an Increase in SMB Business Sales


BizBuySell, an online resource for business owners and interested buyers, has released their quarterly report for the first quarter of 2023. In this report, they share an analysis of what’s changed since the last quarter of 2022 and how this quarter compares to a year ago. The full report can be found on BizBuySell’s website, but here is a brief overview of their findings and what’s next for business owners and buyers.


Overview


According to the report, a 4.8% increase in small business acquisitions was seen in Q1 of 2023. This is not only an increase from the last quarter, but also an increase over the past three quarters. This positive gain shows hope for the market as buyers and sellers are adjusting to new economic conditions.


Other positive statistics from the first quarter of 2023 show that businesses sold had higher financials, with median revenue rising 6.7%. BizBuySell also mentions that online viewings of listings have increased substantially as compared to the last three quarters.


Overview of business sales and listing information for Sacramento, CA

In the Sacramento, Arden-Arcade, and Roseville, California area, the median asking price increased from last quarter to $365,000. Listings also increased from 246 to 253, and median revenue remained nearly steady with a slight decrease to $550,000.



Here are 4 key takeaways from BizBuySell’s overall report, along with an outlook on the coming year.


1. Buyers feel confident.


Many buyers are negotiating a lower price due to higher interest rates making their purchase more costly. However, the current economic climate is viewed as an opportunity by many buyers. BizBuySell reports that “38% of buyers currently believe they can get good value at a favorable price.”


Because of this shift, business owners are more open to negotiations, especially those looking to retire. As the baby boomer generation (those 55+) nears retirement, many are willing to part ways with their businesses.


2. More business owners are speeding up their exit strategy.


According to the report, “nearly a third (28%) of business owners say they are speeding up their exit timelines.” 44% are motivated by retirement to sell, 30% are saying they’re feeling burned out, and 21% are looking to exit due to economic uncertainty. Many aren’t sure if the market will enter a recession, so they are looking to exit now rather than to wait and see what happens.


3. Inflation, rate hikes, and the labor market are still impacting profitability.


While the consumer price index is pointing toward inflation beginning to slow down, many business owers still feel it’s affecting their businesses. 73% of business owners surveyed say they didn’t feel as though inflation was easing at all.


Additionally, higher interest rates are affecting both buyers and sellers. Current business owners are facing higher loan payments and interested buyers are having a more challenging time finding financing.


The labor market is also playing a role in profitability for business owners. According to the report, 65% of owners note that labor costs are making an impact on their bottom line.


4. In today's market, seller financing has a more significant impact.


As mentioned, interest rates are currently high, driving many potential buyers to hold off on making a purchase or struggle to secure financing. This is where seller financing can come into play. The report notes that, “Over 70% of business brokers surveyed feel seller financing is important in today’s market.”


Seller financing can be an attractive option for interested buyers, especially if the interest rates offered by a seller are less than rates proposed by traditional financing options.


It can be an additional way for sellers to increase the amount they profit from the sale of their business.



Spring and summer market outlook


The BizBuySell report notes that inflation and higher interest rates will still likely affect small businesses over the coming months. However, there is hope of the market adjusting to the current economic conditions as seen by the increase in activity in this first quarter of the year.


Two crucial factors will continue to affect the coming months:


  1. Buyers will continue to seek new opportunities. The report notes that “Rather than wait for conditions to improve, 30% of buyers expect to find unique opportunities.” This is due to more interested buyers wanting to leave the corporate world and have more control over their careers.

  2. More baby boomers will continue to look toward retirement and part ways with their businesses. As this generation ages, they are more likely to sell their businesses, creating an increase in the supply of businesses available for purchase.


Next Steps

Given the current market conditions, now is the time to begin considering exit planning if you’re a business owner, or searching for the right business to purchase if you’re an interested buyer. Contact us today to help you with your business acquisition needs.


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