The Q2 2024 BizBuySell Insight report came out, and the market for small businesses continues to be strong. However, both sellers and buyers are being creative to deal with some economic pressures, including high interest rates. We have distilled the key takeaways below.
Market Rebound and Growth
Small business acquisitions grew by 5% over the past year and 3% from last quarter, reaching $1.9 billion in enterprise value. This is a 20% increase from last year, showing a strong recovery to pre-pandemic levels.
Price and Demand Dynamics
The median sale price hit a record high of $375,000, driven by demand for businesses with solid financial performance. Median revenue and cash flow of sold businesses increased by 4% and 7%, respectively.
Strategies to Combat High Interest Rates
Despite high borrowing costs, 58% of buyers negotiate lower purchase prices, seek alternative financing, or increase down payments. Seller financing and earnouts have also become more common to accommodate high rates.
Buyers Prioritize Financial Performance
42% of buyers prioritize financial performance when purchasing a business, followed by growth potential (26%) and location (15%). Stability remains crucial, with recession-resistant businesses being the most desirable.
Sector Highlights
- Service Sector: Median sale price jumped 17%, with strong margins and stable revenue.
- Manufacturing Sector: Sales soared 35%, with a 31% increase in median sale price and strong earnings.
- Retail and Restaurant Sectors: Retail transactions dipped 2%, with sale prices down 4%. Restaurant sales remained flat, with a 6% drop in sale prices.
Economic Outlook
With interest rate cuts anticipated, the business-for-sale market is expected to grow modestly. Small business owners are optimistic, with 37% expecting their business value to increase over the next year. The upcoming presidential election also impacts market sentiment, with many small business owners favoring Donald Trump for positive business impacts.
The small business acquisition market continues to be resilient, adapting to economic challenges with strategic deal structures and a focus on financial performance. As economic conditions improve, opportunities for both buyers and sellers are expected to increase.
Ensuring that you have the right people to help you through the process is key to a successful sale or purchase. Schedule a Free Consultation with one of our experienced Transworld Advisors today - click HERE to learn more.
