Business for Sale Market During COVID-19: A Paradox of Unique Opportunity and Uncertainty
This report takes a particularly close look at how COVID-19 has affected the market and how that may shape the future. Here are the top takeaways:
Median Sale Prices Jump 20%, Driven by High Demand for Pandemic-Proof Businesses
While opportunistic buyers may be expecting deals, the most sought-after businesses are "essential", meaning pandemic proof, performing well and unlikely to come at a discount. Due to increased popularity of these businesses, the median sale price of businesses sold in the 3rd quarter grew 20% versus a year ago as stronger businesses cross the finish line.
Asset Sales Become an Increasingly Popular Path to Business Ownership
The only sure discount for value shoppers is likely to come by way of a business asset sale. In these sales, the buyer is not purchasing an operating business, but is purchasing a portion or all the business’s assets such as inventory, equipment, supplies, licenses and real estate. As these are non-operating businesses, there is no multiple associated with any cash flow, providing a very low-cost entry point.
Most Baby Boomers Impacted by the Pandemic Choose to Hold on to Their Businesses, for Now
In recent years, business-for-sale supply has been fueled by retiring Baby Boomers, of which the lion’s share has yet to hit the market, according to Andy Kocemba, President & CEO of Minnesota based brokerage Calhoun Companies. Battle tested from the Great Recession, but now nearing retirement, these owners are having to assess their exit plans given the unknown duration of the pandemic.
Pandemic, Policy and Election Concerns Remain Largely Divided
While business performance is a direct concern for owners, overall safety and wellbeing is the driving force. In March, during the onset of the pandemic, the U.S. swung full tilt toward virus control with federally imposed safety restrictions shutting down all but essential businesses. Of course, these measures paralyzed hundreds of thousands of businesses, so it’s not surprising that 94% of owners do not consider further shutdowns an option. However, owners are far more divided in terms of what actions officials should take.
Small Business Looks Forward to a Return to Normalcy
As we round the stretch of the most uncertain year in decades, all eyes are tuned to the election with hope that whoever occupies the oval office on January 20th will encourage policies that restore the country to a pre-pandemic environment. While Americans await the outcome, some transactions are certainly being put on hold.
While the pandemic will continue to keep everyone on their toes, it’s important to remember that there are plenty of opportunities for buying and selling out there—and we’d love to help you on your way.
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