BUSINESS SALES REPORT SPRING 2022
In the first quarter of 2022, personal services, construction, business services, and consumer goods/retail businesses led the Main Street market while manufacturing, construction and wholesale/distribution continue to lead the lower middle market.
Buyers continue to look for businesses with strong earnings and steady cash flow. In today’s market, service businesses are in demand as over the past five years, the number of service businesses changing hands has grown to 45% of all reported business transactions, compared to 37% in Q1 of 2017 according to BizBuySell. In fact, 35% of buyers today say they are seeking a service business. Service businesses have been noticeably unaffected by the pandemic, and some have seen their business blossom. Examples include healthcare facilities, automotive repair shops, self-storage businesses, distribution services, car washes and laundromats. These businesses offer steady streams of income and are less likely to be impacted by economic and pandemic uncertainty, as many of these are essential businesses. Attributes of business that buyers want include ecommerce functionality and low overheads.
Restaurants continue to make a strong comeback, with closed transactions up 42% over Q1 2021 but down 22% from Q1 2019 according to BizBuySell. Those restaurants in demand are take-out and delivery restaurants, plus those equipped with large outdoor seating areas or drive-thru capabilities.
Uncertainty for small businesses with supply chain shortages, labor shortages and rising costs of goods is expected to continue through 2022 and into 2023. However, buyer demand is expected to hold steady.
An increasing number of small business owners are looking to sell and retire, as pandemic burnout weighs heavy. Of owners recently surveyed by BizBuySell, the majority (55%) mention retirement as the primary motivation for selling. Many business owners that have been on the fence about selling have decided now is the time to sell.
According to BizBuySell, the top factor that prevents businesses from selling is the seller having unrealistic expectations. Those sellers who have realistic expectations and have clean books and records are at an advantage. Sellers need to get their financials in order and leave personal expenses out of the financials of the business. If you include personal expenses in the business, it makes it incredibly difficult to get SBA loans. In addition, the more an owner is involved in the business the harder it is to sell it. Therefore, it’s important to get systems and processes in place for the next owner and document everything.