A growing number of baby boomers exiting their businesses and improving business financials are fueling record national small business sales, according to BizBuySell. A total of 5,383 businesses were reported sold in the first two quarters of 2018, putting the year on pace to surpass 2017’s record high of 9,919 transactions.
New Mexico’s business-for-sale marketplace is also healthy, but it’s not exactly booming.
In the second quarter, Albuquerque had 89 businesses listed for sale via BizBuySell, an Internet business-for-sale marketplace. Of the 89 businesses listed, seven local transactions closed at a median sale price of $400,000, according to BizBuySell’s Q2 2018 Insight Report. The businesses sold had a median revenue of more than $1 million and a median cash flow of nearly $200,000. Buyers paid on average 94 percent of asking price.
In the first quarter of 2018, four transactions closed for businesses with an average median revenue of $135,000 and a median cash flow of $100,000, sold for a median sale price of $127,000. On average, they received 100 percent of asking price, Business First previously reported.
Not all transactions are reported to BizBuySell and data from for-sale-by-owner transactions is not collected. Some transactions are also excluded due to confidentiality.
Albuquerque’s business-for-sale market is busy, with solid listings and buyers moving to purchase, said Bob Cortez of Albuquerque’s Corporate Investment Business Brokerage. The average market time for a business listed to sell is six to nine months, he said.
John Lastra, business broker at Colliers International in Albuquerque, said the local market is stronger than it was three years ago, but still less economically robust than BizBuySell reports. A variety of buyers are purchasing businesses, said Lastra. Half of his buyers are from out of state, and he projects more will relocate from California to New Mexico because of the lower cost of living. The most sought-after businesses are manufacturing, service and retail, according to BizBuySell.
Dennis Houston says it is not all baby boomers selling their businesses. He’s a local private consultant for mid-market business owners planning exit strategies who represents them in the sale of their businesses. Houston said he has younger clients who are just burnt out from owning a business and want to sell. Businesses that held on through the recession are selling now because they can make a decent profit, but not as big as they would have made 12 years ago, said Houston.
A lot of people lose jobs because local, healthy businesses close due to tired owners, said Houston. He recommends businesses consider exit strategies such as an employee stock ownership plan (ESOP). ESOP gives stakeholders like employees a chance to take ownership of the business.
The ability to find funding to buy a business is improving, said Houston. Some local credit unions are lending to businesses. Microlenders such as Accion, Loan Fund and WESST are increasing their lending from small loans of $10,000 to $20,000 — in some cases as high as $500,000, said Houston. Crowdfunding is also becoming an increasingly viable funding option. More access to funding is projected to contribute to helping the local business-for-sale marketplace move forward, he said.
By: Maria Gomez (ABQ Business First)
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