Sales of small businesses were down in the 2nd quarter of 2012, according to BizBuySell, the Internet’s largest business for sale marketplace.
BizBuySell.com’s Q2 2012 Insight Report shows a 1.6% decline in small business transactions in the second quarter of 2012 compared to the second quarter of 2011.
While 1,603 small businesses sold in the second quarter, 3,332 businesses sold in the first half of 2012, which is actually a 1.2% increase over the first half of 2011.
So what does that mean?
Are transactions of small businesses for sale increasing or decreasing?
Mike Handelsman, group general manager of BizBuySell, thinks it’s just a blip and we’ll continue to see a strong recovery in the small business for sale marketplace in the second half of 2012.
“While we don’t like to see a drop in reported small business transactions, our analysis suggests that this quarter’s decline is a small hiccup in an otherwise consistent path to recovery,” Mike Handelsman, group general manager of BizBuySell.com and BizQuest.com said. “Based on what we have heard from brokers, as well as our own experience, we are expecting a strong second half for 2012 that will continue the slow but steady improvement we’ve seen since small business sales activity began to strengthen in mid-2009.”
Small businesses are financially healthier.
Another interesting piece of insight from BizBuySell’s report is that small businesses appear to be financially healthier.
While the total transaction of small businesses sold in Q2 year over year was slightly down, the median revenue increased to $360,000 in Q2 of 2012 from $340,000 in Q2 of 2011. Furthermore, the median annual cash flow increased to $86,508 in Q2 of 2012 from $85,000 in Q2 of 2011.
Asking prices are more realistic.
What’s sparking the increase in the sale of small businesses?
Besides stronger financials and an increase in the availability of acquisition financing (small business loans), much like the real estate market, sellers are more realistic with their asking prices. The median asking price of $236,750 in Q2 of 2012 is down from $239,000 in Q2 of 2011.
Bush tax cuts are ending.
One unknown that might convince a small business owner to sell sooner than later is the expiration of the Bush capital gains tax cuts. Unless the 15% tax cuts are extended, the tax rate will return to 20% in 2013, which will significantly impact the sales proceeds a seller will net from the sale of their small business.
“Business owners who are considering selling should realize the major impact this tax increase will have on their total takeaway and should start planning accordingly,” Handelsman said. “Even if an owner thinks he or she can get a better closing price in 2013, the difference could be negated through a lower after-tax take if the tax cut isn’t extended. Brokers and other advisors know this and will likely encourage owners to expedite the sales process in the next six months.”
LEAVE A COMMENT BELOW: Have you sold your business or are thinking about selling your business? What are your thoughts on the current state of the small businesses for sale market?
To contact the writer on this story: Philip Nowak in Chicago at [email protected] Please contact us if you’d like to submit a small business innovation story or small business tech startup, product or service.
Philip Nowak is the founder of Firmology, a small business news and information media company focused on helping small business owners grow their business through technology and innovation. You can find Philip on Google+, Twitter and LinkedIn.