According to a new survey by BuyBizSell.com, the annual Business Buyer-Seller Confidence Index, business owners who seek to sell their businesses are feeling more confident about their ability to do so and for a higher price. Prospective buyers were less optimistic about their chances of purchasing a business for what they considered a good deal than they were last year.
Overall, the sellers surveyed felt more optimistic about the market, believing that it had improved and that buyers – who had previously been seen as scarcer – could be located for their businesses. And not only did they feel more optimistic about the market right now, but they believed that this trend would continue into next year. Given that the median time to sell a business over the past two years has been 172 days, or approximately 6 months, this optimism would seem to translate into actual business listings, which is what we’ve seen over the course of this past year: a record-breaking year for small business sales.
This reading of the current market was shared by business buyers surveyed who believed they were better off purchasing a business last year and that this trend would likely continue into next year. Fifty-seven percent (57%) of prospective buyers also believed that small businesses were currently overvalued.
This lowered optimism doesn’t seem to be prompted by capital unavailability. Half as many prospective buyers as last year listed lack of capital as the reason they would hesitate to purchase a small business. Despite this perception of a more capital rich environment, however, nearly twice as many prospective buyers wanted to include seller financing as part of any business sale as did not. Unfortunately twice as many sellers indicated they would consider seller financing as a way to finance a business sale as did not. This puts buyer and seller expectations a bit at odds with each other.
In raw scores, with 100 considered the perfect environment in which to buy or sell a business, the average 2015 seller score was a 62, up from a 56 last year and the year before. The average buyer score was a 47, down from a 52 last year.
From a business broker’s perspective, seller confidence is a good thing because even when it doesn’t match buyers’ mood, it means that businesses will be listed for sale, an opening bid for negotiation can be made, and deals will eventually be brokered. It’s important to realize that no matter what buyers or sellers feel about the market, good deals that benefit both buyers and sellers can be made.
If Calder Capital can assist you in either selling your small business or in seeking out the right business opportunity for you at this time, we’d love to talk to you about the market we’re experiencing right now. Contact us today to begin that process.