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Sales of Small Business Hit Record High Prices in Q3

Sales of Small Business Hit Record High Prices in Q3
Written by publishing team

The number of businesses being bought and sold continues to increase with the third quarter seeing a 17% increase in acquisitions over the previous quarter, according to the latest Insight report from BizBuySell.

The report also indicates that sellers feel more confident that they can get a good price for their business. Average corporate revenue sold in the third quarter was $671,713, up 6% from a year ago. While the average asking price for companies was $350,000, compared to $345,000 for the previous quarter.

The report, which included about 2,400 business owners, buyers and brokers, also revealed that buyers are paying very high prices to companies that have continued to do well during the pandemic.



Small business acquisitions hit record price hikes in Q3

  • About 19% of transactions were sold at $1 million or higher during the third quarter of 2021. These companies averaged $500,000 in cash flow and were in the market for 178 days.
  • 49% think they can get a higher selling price today than last year, while 46% say the main factor is improved sales or revenue.
  • With supply limited from profitable businesses and regret losing last year’s low prices, buyer confidence has fallen to 48%, down from 60% in 2020.
  • About 49% of business owners say a lack of labor is affecting their small business.
  • Despite shipping delays and higher material and labor costs, 47% of small business owners say their business is doing better than it did in 2020.

Photo: bizbuysell.com

business acquisition trends

The supply of businesses for sale is expected to grow as more Boomers retire. Nearly half of the acquisitions (43%) occurred in the service sector, followed by retail (16%), manufacturing (12%), and restaurants (4%). As COVID infection rates drop, retail sales are rebounding. In September alone, it was up 13.9% from a year ago. However, many companies still struggle to attract or retain employees. About 49% of owners say labor shortages are affecting their businesses, while business brokers see it as the number one concern facing small businesses.

Photo: bizbuysell.com

What fuels the demand

About 44% of business buyers surveyed say they want to quit their current job to be more in control of their future, with another 13% being newly unemployed. Buyers are also looking for high-performance businesses. Transactions for these companies grow by 29% over the same period in 2019.

Due to the pandemic, more and more companies are also choosing to switch online permanently to take advantage of a larger market share. Nearly 50% of small business owners have focused on digital transformation by choosing to serve customers virtually through online orders and delivery apps.

About 76% of small business owners think these digital changes are part of their permanent operations. Buyers also agree with 64% of them saying it is important for a business to have a strong online footprint in the buying decision.

According to the report, with many business owners focused on recovery, the supply of businesses for sale remains limited. Seller confidence has jumped to 57% this year, up from 45% in 2020, the highest level since 2018 of 58%.

Photo: Depositphotos


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