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The latest BizBuySell Insight Report indicates increasing confidence among small business owners, with many hopeful about the potential impact of the upcoming U.S. Presidential election.
The report, based on BizBuySell’s Buyer-Seller Confidence Index, shows that seller confidence rose by four points to 50, while buyer confidence increased by two points to 54, marking the first year of simultaneous confidence growth among both groups.
According to BizBuySell’s findings, 54% of business owners believe they would receive an acceptable price if they were to sell today. Additionally, 43% anticipate that business values will rise in 2025, while only 18% foresee a decline.
The report underscores the significance of the election outcome for many small business owners, with 67% indicating they believe Donald Trump would have a more positive impact on the small business sector compared to 28% for Kamala Harris.
Rick Murray, owner of Blue Heron in Oregon, commented, “It depends on who wins the presidential election. My business made significantly more money under the last Trump administration, and things have gotten progressively worse under Biden.”
Strong Q3 Growth in Small Business Acquisitions
The business-for-sale market saw a 5% increase in acquisitions in Q3, marking the fifth consecutive quarter of year-over-year gains. Despite a 2% dip from the previous quarter, total Q3 sales reached 2,399 businesses, representing a $2 billion enterprise value—20% higher than Q3 2023.
Buyers have been particularly focused on service and retail businesses, with service sector sale prices up 16% and retail prices up 11% due to robust demand. Restaurant acquisitions increased by 15%, while manufacturing business acquisitions grew by 20%.
However, while financials for sold businesses were generally stronger, with median revenue up 8% and cash flow up 3.5%, the median sale price declined 13% from last quarter’s peak of $375,000 to $325,000 in Q3.
Katrina Loftin of M&A Business Advisors observed, “We have definitely seen a shift from full price to a reduced price—typically around 10% less than asking. We are also seeing more buyers asking for seller financing at a rate lower than the SBA rate.”
Robin Gagnon, CEO of We Sell Restaurants, noted, “Sellers are adjusting their pricing to reflect the realities of financing costs.”
Seller Financing and Interest Rate Impacts
Seller financing has become increasingly common, with 28% of sellers open to offering it, up from 24% last year. Meanwhile, higher interest rates have led buyers and sellers to explore creative deal structures, such as debt service options and favorable terms.
Brian Powell, a Washington-based buyer, shared, “I will be using seller financing so the rates don’t really impact my decision.” Meanwhile, Jon Pastoor of Calder Capital noted that recent rate cuts have had minimal impact on decision timelines, with 70% of sellers and 64% of buyers saying that rate changes have not influenced their plans.
Inflation and Labor Costs Remain a Challenge
Despite some signs of easing inflation, 79% of small business owners report higher costs compared to last year, with rising expenses in materials, labor, and overhead impacting profitability.
Davinder Singh, owner of Bonita Market in California, highlighted ongoing struggles with increased costs, stating, “Managing these rising costs is a critical focus for the business.”
Labor challenges persist as well, with 55% of small business owners saying the labor market has not improved. Yanni Bulaba Diessa, owner of FamilySoft in Ohio, noted, “Attracting and retaining top talent remains difficult, resulting in increased labor costs and necessitating strategic investments in employee development.”
Market Outlook and Future Trends
As the business-for-sale market heads into the last quarter of 2024, nearly 20% of surveyed business owners plan to sell by 2025, with retirement, burnout, and high business values among the leading motivations for exiting.
On the buyer side, 86% plan to make a purchase within two years, motivated by favorable pricing and emerging market opportunities.
M&A experts remain optimistic about the market’s growth potential. Jon Pastoor anticipates a strong finish to 2024, noting, “We have seen an uptick in activity in Q3, and with seller sentiment on the rise and interest rates starting to decline, I think it is a recipe for a strong finish to this year.”
For more details, visit BizBuySell.com to access the full BizBuySell Insight Report, which provides quarterly data on business-for-sale transactions, pricing trends, and market sentiment across over 70 U.S. markets and 65 industries.