Small Business: Sales of businesses heating up
The biz sale market is heating up.
Last year, sales of small businesses nationwide grew 49 percent compared to 2012, according to a recent report by BizBuySell.com. This represented the most transactions since BizBuySell started tracking stats in 2007.
The numbers bode well for 2014, say experts, who anticipate another strong year.
"2013 is really the turnaround year that everyone in the business transaction market had been waiting for," says Curtis Kroeker, group general manager of BizBuySell.com and BizQuest.com, both San Francisco-based online business-for-sale marketplaces.
He attributes the growth to multiple factors, including an improving economy and an aging business owner demographic.
Kroeker says the New York metro market, which includes Long Island, also fared well. In 2013, the metro area saw 552 transactions, up from 484 in 2012, he notes.
Locally, experts say they've seen increased activity both last year and already in 2014.
"We were up in 2013 about 37 percent," says Anthony Citrolo, managing partner of Woodbury-based New York Business Brokerage and Strategic Merger & Acquisition Advisors. And inquiries in January were up 25 percent to 30 percent over the previous January, he estimates.
GOOD VIBES FOR 2014
"We expect it to be a really good year," says Citrolo, whose average deal size is $500,000 to $1.5 million. "There's a lot of owners that have aged up, and these folks have to exit eventually."
While the lending market has improved, seller financing is still popular, he notes.
This is where the seller takes partial payment upfront -- usually from a third to 40 percent down -- and holds a note for the rest, which typically must be paid off in three to five years.
Some hot industries that are enticing buyers include the personal services category (e.g., haircutting and massage places), and the health and fitness category, says Tom Scarda, president of FranChoice, a franchise consultant in Wantagh.
Some of these offer the potential for recurring revenue, such as gym memberships, notes Scarda, who says his transactions were up about 15 percent in 2013 versus 2012.
Rimpal Kumar of New Hyde Park, who bought into the Supercuts franchise in November, says haircutting is a business that isn't likely to diminish in the future. People consistently need haircuts, and it's not an industry that will become computerized or obsolete, she says.
MORE FIRST-TIME BUYERS
Scarda says he's been getting many buyers like Kumar who have full-time jobs but also want to be entrepreneurs.
Kumar, 38, works as a CPA in Manhattan and has two small children.
She and her business partner are in the process of buying an existing corporate-owned Supercuts location on Long Island. It could provide flexibility down the line if she ever decides to move into a full-time business owner position, she said.
"People are making moves to secure their own future," says Scarda, who says he previously saw more downsized workers looking to buy into a job. "People have learned you can't rely on corporate anymore."
Since the recession, small companies have also done a better job of cutting the fat and improving their bottom lines, making them more attractive to buyers.
In the New York area, median revenue of businesses sold was $480,000 in 2013 compared to $420,000 in 2012, according to BizBuySell.com. Median sale price was $229,500 in 2013 compared to $219,000 in 2012.
Owners looking to sell can make their companies more attractive by getting their financial records in order and fixing up their facilities, Kroeker says.
"Run it as if you weren't going to sell it," adds Citrolo. "Don't mentally take yourself out of the picture."
Last year, 7,056 small business sales in the United States were reported to BizBuySell.com, up from 4,730 in 2012.