The Q3 Insight Report is in, and we have a few key takeaways for you! After five consecutive quarters of year-over-year growth, small business acquisition activity has slowed, according to BizBuySell’s Insight Report for Q3 2022, which tracks and analyzes U.S. business-for-sale transactions and sentiment from business owners, buyers, and brokers.
2022 Q3 Closed Small Business Transactions
In the Salt Lake Metro Area (which includes Utah County), 159 businesses were listed for sale, and 38 business sold during the quarter. The median asking price was $440,000 and sales price averaged 90% of asking price. Although the listed businesses had a multiple of 3.13x SDE (Seller’s Discretionary Income), businesses actually sold at a multiple closer to 2.6x SDE. More significantly nationwide, small business asking prices in Q3 dropped 13% and sale prices dropped 14% year-over-year, respectively.
Small Business Owners Are Less Confident Due to Inflation and Recession Fears
Most small business owners are concerned about the value of their business. With upward pressure on various costs, continued issues with the labor market and the supply chain, they feel that their businesses will be worth less with these economic pressures. Another owner fear is that with a looming recession, their window of opportunity to sell their business for top dollar may be gone. This is disheartening to them after all the work they did to survive and thrive after the COVID restrictions.
Buyers are More Optimistic, Expecting Discounted Sales Prices
Small business buyers are much more confident in the market, as they are finding that the prices for businesses are more accessible, even with higher borrowing costs. However, buyers believe that some sellers are still setting unrealistic prices for their businesses, but there will be opportunities for prices to go down due to economic uncertainties. In addition, demand is up for restaurants, as both outdoor and indoor dining have bounced back since COVID.
In summary, the market will continue to soften due to all of the above factors, but there are great opportunities for both sellers and buyers. As our CEO, Diane Hartz Warsoff was quoted in the report: "The current trend we are seeing is more sellers looking to cash out. Owners who survived COVID and have been able to strengthen their businesses are tired, and they are ready to move on. Employment is still an issue, as many businesses are still having a hard time recruiting staff. Although the recent jobs report indicated a slowdown, unemployment is still very low."
If you would like to learn more about how buy or sell a business, schedule a confidential, no-obligation consultation with one of our experienced brokers, click HERE.
To read the full report, click HERE.
