Curious about the current business maker? Read below to learn what happened in 2020 and what we can expect in the future.
Key takeaways of the 2020 market data:
- The federal stimulus packages offering reduced loan fees and coverage of certain payments continue to increase the demand of businesses for sale, both by buyers and lenders.
- Many business owners waited out 2020 instead of listing their businesses for sale, we expect as businesses recover and restrictions ease, these owners will fuel the increasing market demand for buyers.
- Buyers are flocking to the small business marketplace, especially for high-performing businesses which are causing some owners to reconsider their exit timeline.
- Although you would expect the market to flip, because of increased buyer demand it is still a seller’s market for most industries, especially those that did well through the pandemic.
As for 2020 overall, the business sales market started off strong, the pandemic and lockdown easiest transactions. But by June, sales were back up as confidence was increasing. We also saw that businesses' median revenue and cash flow numbers were increasing, a good sign for the economy.
Prices of businesses also grew in 2020 over 2019, due to the limited supply of profitable businesses as well as the incentive of 6 months of free payments for SBA loans that we saw in Q2 and Q3 of 2020 for buyers of businesses.
Surprisingly the median revenue and cash flow for businesses that were sold was up over 2019. This could be due to the fact that ‘pandemic-proof’ businesses were in high demand and selling quickly while some businesses that were hit harder. As the year progressed, the data continued to get stronger.
Larger transactions continued to receive higher multiples, although even businesses affected by the pandemic still received a respectable 2.38 times cash flow.
Besides pandemic proof businesses, the service sector was in high demand. Businesses like HVAC, delivery and auto repair were most popular among buyers. Retail saw a revival in late 2020, while restaurants still were the most impacted by the pandemic, including how many sold through the year.
What do we have to look forward to in 2021?
Despite a challenging year, we have a lot to be positive about if you are looking to buy or sell a business. In a strange twist, it’s equally a good time to be a seller and a buyer.
If you’re thinking about buying a business, there has never been a better time! The government will pay the first 6 months of your loan payments, closing costs are reduced, and interest rates are still at all-time lows. Even in a competitive environment, these factors allow you to receive an incredible ROI on your investment in a business
If you are thinking about selling your business, there has never been a better time as well!! There are hundreds of new business buyers in each market daily and the stimulus package incentivizes them to get a deal done before September 30th.
We’d like to thank our partners at Bizbuysell for providing market data, you can learn more about them at bizbuysell.com or look for their quarterly insight reports.