Business Sale Transactions: 2014 Second Quarter Report, Colorado

Albert Fialkovich — Tue, 06 Jan 2015 22:43:33 +0000

While the small business sales market continues to thrive, Colorado is seeing similar statistics to the rest of the nation. According to bizbuysell.com, the market has reached its highest volume since the recession in 2008. With these second quarter numbers, we have surpassed Q2 numbers of 2013 and expect the market to continue on this path and surpass total volume of 2013 by year’s end. Bizbuysell also reports that this past quarter is only 3% behind the record high of 2,098 transactions in Q2 of 2007.

So far in 2014 we have seen an 18% increase in the first quarter and 11% increase in the second quarter, from the same time period reported last year. “It is an exciting time in the market, like we are seeing multiple industries thrive in Denver, the business market is no different,” says owner Al Fialkovich, “we expect the market to finish strong in 2014 and continue to increase into next year.”

Financial Performance Indicators

Also increasing is the financial performance of businesses for sale in Colorado and the nation. Both median cash flow and median gross revenue increased at 8% and 1.6% respectively, year over year. Median cash flow for listed businesses now sits at $100,000 and median revenue at $400,060. However, the ratio between asking price and sold price remains fairly steady.

Revenue multiples increased 8% from 0.58 to 0.63, while cash flow multiples have remained stagnant at 2.23 in the national market. Currently, the average cash flow multiple in our sold Colorado businesses is slightly higher at 2.28.

Future Outlook

We continue to anticipate a strong market through the end of 2014 and into 2015. We are still very much in a demand market, however the low multiples that continue after the recession are providing an excellent purchase value for buyers. We may see this situation reverse and multiple increase as buyers compete over the lower supply, however with the possible tsunami of sellers in the baby boomer demographic the market may not have time to work through this before the supply drastically increases.

Transworld Business Advisors of Denver is a team of Denver business brokers that helps visionary entrepreneurs buy a business, sell a business, or grow a business through franchising. If you are interested in having a conversation about what your business is worth, or how to sell your business you can contact us via email or phone at 720-259-5099.

*Market data and charts provided by Bizbuysell.com.

The Baby Boomer Seller Tsunami: How it Affects the Value of your Business

Albert Fialkovich — Tue, 06 Jan 2015 22:34:17 +0000

No one can argue that the impending baby boomers retirement will affect how business markets operate currently. And it will be no different for mergers and acquisitions and small business sales. In the current market, it is estimated that approximately 30,000 – 50,000 business sales occur every year. With the wave of baby boomers planning to exit their businesses, however, SME Research predicts that up to two million businesses will be sold between 2017 and 2020. This would increase the market volume ten-fold, to an average of 500,000 businesses each year.

What does this mean for sellers?

Right now we are experiencing a seller’s market. There are many more qualified buyers searching for good business opportunities than good businesses available for sale. Over the next three years that will slowly start to flip, until we have a strong buyer’s market where many business owners will be competing for deal dollars. From a basic economic standpoint this means two things for business owners planning on selling in that market: 1. Sale prices will go down 2. Competition will increase and it will be harder to sell your business.

What does this mean for buyers?

If you are in a position to buy a business or add-on an acquisition opportunity to your current operations, this time could be incredible for you. Buyers may be able to expand their business operations and overall value during this time through savvy acquisitions.

So what should I do?

If you own a business and you are thinking about selling in the next three to five years, don’t wait. Yes, it is true that you can price any company right and it will sell, in any market condition. However, if you want to avoid the unknowns of the potential decreases in valuation put your business on the market now. Just because you sell your business, does not mean you have to exit your business. You can construct employment or contract agreements that keep you involved and working for years after the sale. At the very least have a conversation with a professional advisor like a business broker, business attorney, or financial planner and begin planning today.

The Seller Tsunami is not something to fear, but simply something to plan for. The baby boomer generation will affect business sales. If you are worried about how the baby boomer generation will change your business value, start planning now.