The difficult economy is negatively impacting business-for-sale transactions and valuations for small businesses in the United States.
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That's according to data recently released by BizBuySell.com, the Internet's largest marketplace for buying or selling a small business.
The number of closed transactions reported by BizBuySell.com in First Quarter 2009 was down 36% as compared to the same time period in 2008.
The news of a slowing business-for-sale marketplace extends a trend that started in the previous quarter. In Fourth Quarter 2008, BizBuySell.com reported a 20% year-over-year decrease in closed transactions.
"It's not surprising that the number of closed small business transactions continues to decrease," says Mike Handelsman, General Manager of BizBuySell.com. "Many business brokers are reporting a record level of buyer interest, but limited access to capital and uncertainty about the future have proven to be major barriers in deals getting off the ground and closed."
BizBuySell.com receives reports of closed transactions from business brokers nationwide. The site currently has an inventory of over 50,000 businesses for sale.
Popular Business Valuation Metrics Are Down
In addition to fewer deals getting done, BizBuySell.com reported a decline in popular metrics used in business valuations. Both revenue multiples and cash flow multiples have declined relative to the same quarter last year.
Revenue multiples on reported closed transactions dropped 5.5% to 0.69 in the first quarter of 2009. Similarly, cash flow multiples dropped by 3.8% to 2.69.
Revenue and cash flow multiples are calculated by dividing the selling price of the business by its reported annual revenue or cash flow.
The median sales price for closed transactions also declined year-over-year, from $200,000 to $165,500 – a 17.3% decrease.
"Even though record levels of corporate layoffs have created tens of thousands of hopeful entrepreneurs, the decreasing sales prices and revenue and cash flow multiples make it clear that buyers are approaching deals with more caution than ever," says Handelsman.
Business For Sale Statistics and Trend Data
The BizBuySell.com First Quarter 2009 Insight Report reports business-for-sale metrics for the total U.S. and for more than 70 major metropolitan areas.
In addition to reporting the national statistics above, we have separately reported Q1 2009 Business For Sale Statistics for select cities in the United States.
Metrics are also available by industry and business type. The current Insight Report comprises data from 1,146 closed transactions and more than 27,500 active listings.
For more information, check out the, visit BizBuySell.com First Quarter 2009 Insight Report