Sales of Small Businesses Are Up | Business Sales

But 2^nd Period Gain Reflects Owners? Recognition That Businesses Are Worth Less

BizBuySell.com, an online marketplace for small-business acquisitions, reports that sales of businesses with approximately $350,000 in annual revenue rose 8% from last year.?However, the growth is not a result of significant improvements in business performance or an increase in bank lending. Owners have come to accept that their businesses are no longer worth what they once were.?Many sellers have dropped their asking prices and have agreed to finance a large portion of the deal themselves.

A number of sellers have simply reached their breaking point, and can no longer wait for the market to improve.?Additionally, with the tightening of the credit markets, many sellers have to offer financing to close deals.?According to the Wall Street Journal, last summer a restaurant owner in Redwood City, CA, put his 200-seat pizza eatery on the market for the second time.?In 2008 he listed the restaurant for $170,000 due to a slump in sales.?Now the owner, who bought the restaurant for $200,000 in 2002, is finally selling it for $75,000, and he is lending the buyer 25% of the selling price.

As for the buyers of these small businesses, they are older, laid-off professionals looking for another line of work.?Unable to land jobs after being laid off, some buyers are tapping into their retirement funds?in order to take up entrepreneurship.?

Even so, an increase in small business sales is generally positive for the broader economy, as such businesses account for more than half of private-sector employment and gross domestic product.?

Despite the current economic conditions, small businesses?are still being sold???as long as owners are realistic about what their businesses are worth and?offer financing.

Sales of Small Firms Are Up.? (2011, July14).? The Wall Street Journal, p. B8.

Alan Lippincott is a business broker and?BestSoCal owner who welcomes calls to (877)?420-6478 and Email Inquiries.? His comments should be regarded as general in nature and not taken as advice without a personal consultation and signed agreement.

Source: http://bestsocal.com/blog/2011/08/sales-of-small-businesses-are-up-2/

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