Small businesses are selling more in Tampa Bay, but financing still a hindrance - Tampa Bay Business Journal
Thursday, July 8, 2010, 10:52am EDT
Monitoring the business-for-sale market locally reveals some strong insight into the health of the local economy.
It also confirms a lot of the recent chatter about an economy that saw some renewed energy at the beginning of the year, but one locally that continues to sputter at times due to our heavy exposure to a soft residential real estate market, and a continued lack of credit.
Through a productive partnership with our newspaper and our colleagues around the country, we have access to quarterly economic data from BizBuySell.com, based in the “other Bay area” of San Francisco.
The latest: Tampa Bay’s business buying market continues to struggle.
There have been 40 closed transactions in Q2 this year, down a bit from the 49 closed in the first quarter.
The Q2 2010 data is based on 784 Tampa-area businesses listed at BizBuySell.com. Those listings include listings from local business brokers, as well as “for sale by owner” listings that have been listed by the business owner without the assistance of a business broker.
Business sale prices are down here 43 percent year over year with asking prices down 40 percent. One trend is that smaller businesses seem to be the ones selling, said Mike Handelsman, general manager of BizBuySell.com.
“The reason is that there isn’t a lot of financing,” he said. “It’s easier to buy a smaller business than a bigger one because they don’t have access to capital.”
Financing through the U.S. Small Business Administration has been more difficult than it once was, said Roger Murphy, president and CEO at Murphy Business and Financial Corp. in Clearwater.
That’s leading to more deals for smaller business with owners providing financing, he said.
Locally, it has primarily been service businesses that are selling.
“They require less assets and are cheaper,” Murphy said. Restaurants, once a very active local category when it comes to business sales, are down because of the economy.
In the larger transactions that are happening, they tend to involve medical businesses, elder care and even pet-related businesses, he said.
With so many displaced corporate folks out of work, many are looking to buy a business or a franchise, Murphy said. There are tools to use 401(k) money to buy a business, and increasingly, that money is being leveraged to buy a business when the job market isn’t yielding much.
Nationally, the business-for-sale market is pointing to a slow “but clearly defined” recovery, BizBuySell.com said.
The number of closed transactions reported to BizBuySell.com in Q2 2010 rose significantly, 6.3 percent, as compared with the same time period in 2009 — from 1,040 transactions to 1,106.
But relative to two years ago, the market is down 47 percent.
Statewide, the average size of business sales was $270,000 in 2009 and that’s down to $243,000 this year. But there has been significantly more deal activity in 2010 than in 2009, so that’s a positive said Murphy.
The median sale price for closed business-for-sale transactions in the United States during Q2 2010 was $155,000, down from $160,000 in the second quarter of 2009. Most local markets are seeing lower median asking prices for listed businesses and BizBuySell.com notes that these two downward trends suggest that sellers may be getting more realistic about business valuations.
But here, sale prices are declining more dramatically, making Tampa Bay a “more challenged small business market than the rest of the country,” BizBuySell’s Handelsman said.
But the “big trend,” he said, remains the lack of financing.
“If a seller wants to sell, they need to help finance the sale and take deferred payments,” Handelsman said. That’s what’s helping deals happen nationally. Sellers can be reluctant to do that and want to get out with cash if they can.
The numbers are getting more realistic.
Business owners in the Tampa area will typically ask for, on average, a revenue multiple of .84 (changed from .96 year over year) and a cash flow multiple of 3.21 (changed from 3.50 year over year), BizBuySell.com data shows.
The wild card, he said, is how the BP oil spill will impact the economy.
Here are some additional stats on the local business-for-sale market:
• The current median asking price of businesses for sale in Tampa Bay: $174,950.
• What it was a year ago: $195,000.
• Median revenue for listed businesses in the Bay area: $303,646
• Median revenue a year ago: $339,295
• Median cash flow (money that comes out of the business over a year): $76,890, versus median
• Median cash flow at this time last year: $80,000
Categories: Residential Real Estate
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