Small and mid-size businesses are commonly sold through an escrow company, very similar to a real estate transaction. (Larger ones typically don’t, since they use the service of attorneys to provide the same functions.) So some of the best indicators of how the market is doing are the escrow companies.
I talked to a leading escrow company in California, and they indicated that smaller businesses were selling briskly. Larger business transactions have been quietly recently, but are starting to pick up a little.
Why are small businesses sales up? One reason is the economy, believe it or not. Every time unemployment goes up, there is an influx of buyers that wish to be business owners. You can imagine the scenario. A middle-aged person is laid off, and they are pretty frustrated at being an employee, or maybe even concerned that they can find a decent job at all. They have significant savings, so they decide to take the leap into business ownership.
At my business brokerage, we are talking to a buyer right now who says it perfectly: “I have made a lot of money for other people my entire life, and now I want to make money for myself.” He has worked up to being the CFO and operations manager of a good sized company, and now wants to leave and purchase a company (in this case he wasn’t laid off). He intends to run the company for 10 years, and then sell it and retire. In my opinion a very good plan.
Of course, finding a good business is more difficult now than it was a few years ago, and it wasn’t that easy then. But there definitely are good businesses out there. My company represents a sign manufacturing business that has a niche doing gas stations signs, and he is doing very well. I’m talking to a fruit-and-nut guy (grocery typically thrives during a recession), a nurse staffing company, a fire equipment rental company and a commercial electronics firm that rebuilds high-end products. All these companies are doing well in the current economy. Now the owners have to decide the time is right to sell, and to choose me to help them sell!