According to new data from business-for-sale marketplace BizBuySell, the median number of days it takes to sell a small business has been on a steady decline since mid-2012.
San Francisco, CA – BizBuySell.com, the Internet’s largest business-for-sale marketplace, released a new report on business sale times, which found that small businesses are selling faster than ever in today’s market. The data offers a new perspective for analyzing trends in the small business market. BizBuySell reviewed its database of businesses sold from 2007 to 2014 and analyzed the median length of sale, which is based on the time a business is listed for sale on BizBuySell.com to the date it is reported as sold.
According to the report, the median business sale time declined 23% from its peak of 200 days in Q2 2012 to just 153 days in Q4 of 2014 – the lowest of any quarter since BizBuySell first began tracking sales data in 2007. While there was the usual seasonal increase in sale times in Q1 2015 (likely due to carryover from the holidays each year), the overall trend over the last three years is clearly downward.
“While it’s likely a combination of factors that are driving faster business sale times, the steadily improving economy and an overall growth of buyers on the market has undoubtedly played a key role,” Bob House, Group General Manager of BizBuySell.com and BizQuest.com, said.
Time to Sell Trends Follow Economic Trends
Small business sale times remained relatively consistent from 2007 to 2010 despite the recession that hit in mid-2008. However, from Q3 2010 to Q2 2012, sale cycles dragged on significantly longer. The median sale time during this period rose 22% to 200 days, likely coinciding with a still sluggish economy and unsure future.
“Struggling with personal finances and scarce access to capital, many entrepreneurs likely delayed or abandoned their plans to purchase a business, forcing sellers to spend more time identifying or waiting around for qualified buyers,” House said.
During the height of the recession and even into the recovery, the demand for small businesses was weak and capable buyers were hard to come by. It’s likely that few buyers were in the financial (or risk-taking) position to finalize a deal. As the national economy began rebounding, however, business buyers’ personal wealth and willingness to take on a new venture did as well.
“Access to more lending options combined with an increasing stock market have given more buyers the capital needed to seriously contemplate purchasing a business,” House said. “The buyer pool is also wider and more diverse than ever before, with an uptick of interested Millennials and minorities helping to facilitate faster sales.”
“Lenders are facing more competition so they have bolstered their customer service and speed to lending”, reports Andy Cagnetta, CEO of Transworld Business Advisors, LLC, a leading business brokerage firm. “Buyers are competing for good deals more than ever, and private equity needs to get pent up money to work. Therefore, deals are being snatched up more quickly than in the past few years”, Cagnetta said.
A Balanced Market Helps Quicken The Sales Process
Overall, the data of small businesses sold from 2007 through 2014 revealed that business sale times often parallel broader changes in the economy, and offers useful insight into the current and future state of small business transactions.
With recent surveys of buyers, sellers and business brokers pointing to an increase in the number of Baby Boomers supplying quality listings and younger buyers ready to pull the trigger on business ownership plans of their own, it’s likely the sales timeline remain short.
“The shorter sales cycle should hold, if not drop even further, through the rest of 2015” House said. “There have been few social or economic fluctuations that would indicate otherwise. For sellers anxious to exit their small businesses and move on to the next chapter of their life, or buyers itching for a new opportunity, there’s no better time than the present.”