Small Business Sales Mixed in 2010

In 2010, one of the top political buzzwords of the year was “small business growth”. Washington is very interested in seeing small business grow and expand as part of the broader economic recovery and because of that, numerous stimulus-type actions were taken in 2010 in the hopes of stimulating small business growth. Did it work?

One of the best places to look is at a website familiar to many small business owners. Bizbuysell.com is an online broker who brings together business owners looking to sell their business and buyers hoping to find an established business in their area. Recently, bizbuysell.com published some of their 2010 metrics which gives insight in to small business trends in 2010.

Here’s a snapshot of those trends:

• The number of businesses sold in 2010 was up 3% from the prior year.
• The median sales price fell 6.3% from $160,000 in 2009 to $150,000 in 2010.
• Fourth quarter sales were up 11% from 2009.

According to the survey, the number of transactions was up because businesses owners were more realistic about the valuations of their business. This allowed for more fruitful negotiations and more deals to take place. When valuations start to stabilize, just like in larger businesses, it presents a buying opportunity for those looking to become an entrepreneur. People are more willing to sell when they feel that the price they receive is more grounded in overall market valuation.

There’s a darker side to that number, though. One of the reasons the survey cites for businesses selling for less is because access to capital is still quite difficult. Although the United States Small Business Association has increased funding which, in theory, should make it easier to receive needed business capital, the market has yet to loosen for many.

Recently, CNBC sponsored a small business forum where Fed Chief Ben Bernanke and head of the FDIC Shelia Bair again relayed their commitment to loosening the credit market for small businesses. Bizbuysell.com says that they expect to see credit markets becoming more favorable in 2011 which will see the amount of dealing taking place rise. Year over year comparisons should be even more indicative of an improving small business market.

Finally, as the market begins to recover, baby boomers are forecasted to begin selling their businesses at a rapidly expanding rate. Many opportunities will become available over the next couple of years for those who are looking to buy an established business at lower than expected rates. Bargain hunters may still have a good market for the foreseeable future.

What does all of this mean to the small business owner? Although it remains tough for small businesses, small business growth seems to be picking up according to this and other surveys.