01 Nov The Outlook for Main Street Business Deals
BizBuySell just published its latest quarterly Insight Report. According to this market watcher, 2024’s third quarter posted its fifth consecutive quarter of year-over-year gains, representing a 5% growth over 2023 but slipped 2% from the last quarter. This decline is attributed to business sellers waiting to see the outcome of the upcoming election and hoping to take advantage of further anticipated interest rate cuts, something we’ve been observing as well. While more intuition than anything easily substantiated, some sellers report that election-related uncertainty may have temporarily suppressed their revenue. They expect improvements going into 2025 as consumer confidence rebounds post-election, and some business owners are already beginning to see an increase in activity.
With a total of 2,399 reported sold according to BizBuySell’s database, the biggest beneficiary has been service businesses (39%) followed by restaurants (21%), retail (20%) and manufacturing businesses (6%). Our recent business sales in New Mexico reflect this national trend, with many deals involving retail, service businesses, or a combination of the two. Their large repeat customer bases attracted buyers seeking stability amid uncertainty. In aggregate, these nationwide sold businesses reported an 8% rise in median revenue and 3.5% in median cash flow. Despite these better financials, median sales prices remained flat year-over-year and dropped 13% from last quarter.More sellers are now beginning to enter the market, finding less reason to continue to delay. Interest rates continue to be a factor, but buyers and sellers are adjusting to this new normal. Deals are closing when the financials and business fundamentals make sense. Predictable revenue and earnings are always a factors, but increasingly buyers are honing in on vendor/customer concentrations, staff stability, and similar factors in an effort to have a clear-eyed understanding of a business’s potential risk factors.
Despite some seller’s wait-and-see approach, we now have under contract several smaller retail and services business. There is clearly an appetite among individuals and families looking for opportunities to make the leap into business ownership. To secure these deals, some sellers have been willing to make price concessions or partially finance these deals at rates similar to what banks are offering, reflecting the need for competitive pricing in a fluctuating market.
