Atlantic Highlands, NJ, November 5, 2010 – A Neumann & Associates, a ten-year-old NJ business broker
and business valuation firm has announced that they are seeing small business transactions at a low volume level for the second year in a row.
A significant indicator of small business environment health is the number of businesses bought and sold. 1,117 U.S. small businesses were sold during the third quarter of 2010, approximately the same number that sold last year during the same time period. By contrast, there were over 345 more sold either via business sale by owner or through business brokers, during the same period two years ago in 2008, according to reports BizBuySell.com.
While other areas of the business continue to grow, A Neumann & Associates
reports stable activity levels for the business transference portion of their business broker NJ company.
Similar to the housing market, a combination of tight credit, nervous buyers and owners unwilling to sell at discounted prices has left the small business marketplace without growth. And, they say, for small business owners hoping for a big payoff when selling their businesses via NJ business brokers
, most will need to reset their expectations.
During tough economic times some owners might be forced to sell out of necessity– even as potential buyers stay away for fear that the market still needs to swing up. “This pushes down the value of many businesses that are up for sale, while at the same time reducing the number of businesses that change hands across the board.” according to Achim Neumann, President of A Neumann & Associates, NJ business brokers
Some owners say they have identified interested buyers, but that some of these buyers are unable to obtain sufficient funding amid declines in loans guaranteed by the SBA (Small Business Administration). The agency backed $16.84 billion in loans in 2010, down from about $20.61 billion in 2007.
“One of the problems is that owners are not going through the proper business valuations and as a result are coming up with price tags greater than their companies’ true value,” said Neumann. Many business owners are shying away from the marketplace as a result. Though the number of enterprises sold in the third quarter was the same, there was a 7.1% decline in listings from a year ago, to 31,856, according to BizBuySell.
“Many sellers are offering to finance part of the asking price for buyers to help close the gap, whether they use a business brokers or do a business sale by owner” added Neumann, “We’ve been seeing a sharp increase in this type of arrangement over the last 20 months.”
During the third quarter of 2010, small businesses were listed for a median price of $245,000. However, the average closing sale price in the period was $140,000, 6% less than what owners sold their businesses for during the same period in 2009.
“Some owners are waiting for the market to bounce back and business valuations to go up while others believe we’re already there. It can be a very subjective and emotional situation,” explains Neumann. “We try to take the emotion out of it by putting rigor around what can be a long, messy process left in inexperienced hands.” For more information, please contact A Neumann & Associates