Outlook for Selling a Business in 2018

Outlook for Selling a Business in 2018

Posted on July 09, 2018

Business Sales
All Indications from BizBuySell, the largest business sales internet marketplace, are business sales are stronger than ever and continue to head in that direction.††
  • Median business cash-flows, the best indicator of business health, is up from a year earlier and the solid majority of business owners believe their businessí cashflow will continue to increase.††
  • A decisive majority of business owners expect to increase their labor force as well as increase compensation levels.††
  • Twice as many business owners believe the tax code changes will benefit them as do feel it will be harmful.††
  • The Great Lakes Region leads the nation with a 37% year-over-year increase in business transactions.††
  • Valuation multiples, the multipliers of cash-flow and revenue to determine business values, has been amazingly steady for more than 4 years.
Financing
In general, all indications are banks want to grant loans but are being cautious.† It appears one eye is looking forward and the other in the rearview mirror filled with economic woes of the recent past.††
  • Total business lending, including commercial real estate, has increased at a constant rate since 2010 although small business loans of less than $1 Million are level since the 2008 peak, all a steady 9-year trend!
  • In general, banks are experiencing demand for credit but have tightened their lending standards but qualified applicants feel they are receiving the financial assistance they need.† ††
Economics
In 2017, the number of small business employers (1-499 employees) surpassed the historical high of 2007.† Small businesses have always been the driving force of the economy.††
  • Individual principal incomes are at an all time high since a low 9 years ago.††
  • Since 2010, employment gains from initial business starts has consistently outpaced employment losses from business shutdowns.† The margin of the overall gain between the starts and losses has been steady since 2013.††
Interpretations
Interpreting data for anything is always difficult until seeing it in hindsight.† How all the indicators come together can take different forms since the next stimulus to an economy is unknown.† Businesses in the Great Lakes Region of the country, a region influenced by the ups and downs of manufacturing, are poised to see what effects the new tariffs will bring, something that hasnít been a factor in the past.† ††
All businesses report a shortage of dependable, affordable labor but that is nothing unusual.† Changes in immigration donít appear to have a profound effect on labor but are always being closely observed by advocates.
There has been a Ďhealthy skepticismí prevalent with investors that the next recession is in the distance but how far it will be and how deep itís effects will be felt are being debated.††
Overall, the predictions of business sales by Baby-Boomers, people turning 72 this year, really isnít reaching the massive scale that some writers predicted.† Many writers, however, are still predicting there will be a waterfall of businesses on the market in the not-so-distant future.††
All information has been taken from the 1)SBA Office of Advocacy, March 2018, Quarterly Bulletin and 2)BizBuySell Insight Reports.

Tom Stayanoff is a Senior Broker with Indiana Equity Brokers and specializes in serving small and medium-sized businesses in Northern Indiana.††