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The Market Pulse Report Survey is a resource that has a variety of information that buyers, sellers, business brokers and M&A advisors regularly utilize to better understand the business transaction landscape. The most recent survey was conducted April 1st to April 15th 2022 and had 360 broker and advisor respondents. It also marked the 40th edition of the quarterly report. The Executive Summary of the report can be accessed here https://www.ibba.org/resource-center/industry-research/
The Main Street Market
One notable fact included in the latest report is that in the Main Street market, between 70% to 80% of buyers are likely to come from within a 20-mile radius. However, with larger companies, it is common for buyers to originate from a distance of over 100 miles away or greater. Most industry professionals believe this is because buyers are not willing to uproot their families, sell and buy a home, change schools and churches for smaller opportunities.
The survey also indicated there are two key “headwinds” that businesses are currently facing. These include labor shortages and supply chain issues. Not surprisingly, labor issues are currently creating problems for organic growth. Likewise, supply chain issues can cause prospective buyers to shy away from a business.
The Profile of Current Buyers
The survey also indicated that Main Street buyers not only include the “typical” first-time business buyer. These individuals are often looking for a job in the form of owning a business. Serial entrepreneurs who have made money off previous deals are also now seeking to jump back in and buy another business. The survey indicates that about one-third of buyers who purchased businesses in the $500K to $1M range are serial entrepreneurs.
Additionally, there is a great deal of money standing on the sidelines. The money held by private equity, family offices, and corporations. Feeling burned by the lack of bank credit by the 2008-2009 economic downturn, these buyers don’t want to get caught in a similar situation again.
A Seller’s Market
The survey indicates that it is currently a seller’s market and that record setting multiples have been occurring. In Q1, an impressive 97% of businesses were receiving their asking price. However, nothing lasts forever. If you’re considering selling your business, it’s a good idea to start making progress now before this trend stops benefiting sellers.
Even with the strong sales track record last quarter, it’s important to note that a fast sale is still improbable. Even in the best economic conditions, it typically takes 90-120 days to sell a business.
There are many factors currently benefiting sellers, such as low interest rates, SBA involvement, and people not wanting to work for corporations. However, it’s important not to wait for the “right moment” as often that moment never comes and attempting to "time the market" is a fools errand.
It’s always a good idea to begin taking steps to prepare for the sale of your business as soon as possible. This can make a tremendous difference toward fostering a positive final outcome.
Copyright: ENLIGN Business Brokers, Inc.
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