Sales of Small Firms Are Up

More small-business owners sold their companies in the second quarter, but there's gloom surrounding the transactions.

Sales of businesses with roughly $350,000 in annual revenue rose 8% from a year earlier, reports BizBuySell.com, an online marketplace for small-business acquisitions in San Francisco. The increase marks the third year-over-year quarterly gain in a row, with brokers nationwide reporting similar gains.

Yet the growth isn't indicative of significant improvements in business performance or bank-lending volume. Instead, the main driving force is the acceptance among owners that their businesses are no longer worth what they once were. Many sellers cut their asking prices and agreed to finance a significant portion of the deals themselves.

"Sellers are finally starting to come to grips with the fact that it's not 2007," says Stephen Wain, president of Calder Associates Inc., a brokerage in Tinton Falls, N.J. He adds that the firm has completed twice as many deals so far this year as it had in the first half of last year.

According to BizBuySell.com, owners listed a median asking price of $239,000 in the second quarter, down from $249,000 a year earlier. For businesses sold in the quarter, the median selling price was $150,000, down from $155,000.

"People are getting more realistic," agrees A.J. Caro, chief executive officer of Bridge Business & Property Brokers Inc., a national brokerage based in Long Island, N.Y. Small-business sales are up 35% from a year ago, he says, and he is looking to add about 10 more brokers to his current staff of 25.

Some sellers have simply reached their breaking point. "People can only sit on the sidelines for so long," says Robert Bourgeois, chief executive of Sunbelt of Louisiana. The brokerage franchise has sold 21 small businesses throughout the Bayou State so far this year, nearly as many as in all of 2010.
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