A majority of California Business Brokers thinks it will be awhile before the slowed rate at which small and mid-sized businesses change hands will return to pre-2008 levels. That's when purchase funds were much easier to borrow and consumer optimism was high. Nearly half of the brokers and agents polled recently in a BizBen.com Poll don't anticipate a full recovery.
That's the conclusion reached by business sales professionals asked in a statewide survey to predict when we can look forward to a level of business sales activity similar to the closed escrow figures posted thru 2007. A large percentage of respondents, 45%, doubt the rate of business transfers will match up to the annual figures--often about 25,000 deals--recorded in many of the years that preceded the mortgage meltdown and economic ailments that followed. The next largest group was 35% of respondents who predicted the business sales activity will recover, but not until the 2012-2013 time frame.
The survey results also show that about 18% of business brokers and agents who were questioned about a recovery in the businesses for sale market are more optimistic, saying we’ll begin to achieve monthly sales levels matching the pre-2008 numbers within a year. The remainder, about 5%, believe that recovery has already taken place.
The count of businesses sold last year totaled 13,329, a decline from the 14,277 deals recorded in 2009, according to the BizBen Index, which has been tracking and reporting business sales statistics in California for a number of years. The Index reported 21,689 completed transactions in 2008, the year associated with the mortgage crisis. Some 26,238 businesses had been sold the previous year.
Among the observations of business sales intermediaries we spoke with was an often- repeated belief that many potential buyers as well as sellers took a ”wait and see” attitude rather than moving forward with their plans. Some of the buyers actively engaged in looking for purchase candidates abandoned the search when it became apparent that business revenues were declining. And a number of owners of small and mid-sized businesses who were readying their companies for sale decided to put their plans on hold. Their fears were that the prices they could get for their businesses were dropping along with revenues and profits.
"Any time you see a fall off in sales of 50% in just three years, you know it’s time to take a second look at the business," was the comment of one Southern California broker who was asked about this. He referred to the difference in the number of business sales recorded in California last year vs. the 2007 total.
Another of the business brokers noted that "Maybe it’s just a matter of a correction in the market. I’m sure we’re going to see sales volume come back up. The underlying forces are there. The demand is building for buyers and sellers. But it will take a while."
About the Author: Peter Siegel, MBA is the Founder of www.BizBen.com (established 1994 - 7000+ California businesses for sale, 200 new listings daily) and the Director of the BizBen Network (16,000 business buyers, 4,000 small business owners, 1,800 California business brokers & agents). BizBen.com offers business buyers free online webinars/educational events, and phone consultations on the best way to find and buy a California small to mid-sized business. Peter Siegel can be reached direct at 866-270-6278.
Posted on May 17, 2011 | 
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