A record number of small businesses changed hands in 2017, up 27 percent from 2016 and the largest increase since 2013, according to a recent BizBuySell.com report.
That pace will continue or even increase in 2018, local brokers and experts predict.
“The economy is in a good position,” says Bob House, president of San Francisco-based BizBuySell.com, a business-for-sale marketplace. “A lot of Baby Boomers are ready to sell, and a lot of buyers are optimistic about the future.”
There’s also good access to financing, and people in general have more personal wealth because of stock market gains, he says.
That means opportunities for both buyers and sellers nationally and locally, House says.
The metropolitan region, including Long Island, showed a 35.9 percent increase in small business sales for 2017 versus 2016. The median sales price was $290,000, up 16.2 percent, according to BizBuySell. Nationally, the median price was $227,880, up 14 percent.
These higher selling prices are due to stronger financials.
Nationally, median revenue of sold businesses grew 5.8 percent from $472,798 in 2016 to $500,000 in 2017, according BizBuySell. Median cash flow also increased, up almost 7 percent to $115,000 from $107,551 the year prior.
“Buyers in 2018 will likely have to pay a premium for a solid business that has a history of consistent revenue and profitability,” says Anthony Citrolo, managing partner at New York Business Brokerage in Woodbury.
Last year, Citrolo estimates, the firm handled about 20 percent more transactions than in 2016 and, anticipating more growth, added two more partners as of Jan. 1.
“We think there’s going to be a lot of activity going forward, even more than last year,” he says.
The franchise market was a particular driver of growth. Sales of existing franchised businesses made a 45 percent leap in 2017 compared with 2016, according to BizBuySell.
“It was a great 2017,” says Tom Scarda, a Wantagh-based franchise consultant with FranChoice and author of “Franchise Savvy” (CreateSpace; $18.95).
There are multiple reasons people are attracted to franchises, including buying into an established brand, infrastructure and marketing system, and having access to a track record that can be analyzed and compared to other franchisees around the country, Scarda says. Plus, a well-developed franchisor operating system can have significant structural advantages over the average mom-and-pop business, including state-of-the art online management systems and automated scheduling, he says.
These were all factors that contributed to Michael Danziger’s purchasing a MaidPro franchise this past October.
Danziger, 56, owner of Islandia-based MaidPro Central Long Island, says he was attracted to it as an established brand with ongoing support.
“If you pick the right franchise, they guide you through everything,” he says, noting he recently completed a week of training at MaidPro headquarters in Boston.
“It was very helpful, and their training doesn’t go away,” says Danziger, who worked with Scarda to find the right franchise. “I have business coaches and marketing coaches assigned to me.”
He expects to launch his home-cleaning service later this month.
Home services is a strong area, as are boutique fitness concepts and personal care businesses including massage and eyelash extension, Scarda says.
Anything in health care is strong as well, says Ken Stein, managing director of Kensington Co. & Affiliates in Roslyn Heights, which specializes in mergers, acquisitions and franchise sales and development.
Business sale transactions last year for the firm were up more than 20 percent, year over year, he says, adding, “I really don’t ever remember being so busy.”
A franchise seminar the firm hosted in November attracted 500 attendees, a 25 percent annual increase.
“We’re predicting 2018 to be our strongest year in terms of sales in our 20-year history,” Stein says.
Top reasons business brokers cited for the boom in sales:
28% Stronger revenue and profit numbers
21% More owners looking to sell
19% More qualified buyers