Decoding the Market Pulse Report: Key Insights
The Market Pulse Report is a comprehensive resource that provides valuable insights into the business landscape, often used by business brokers and M&A advisors to better understand the current market trends. This report, a product of extensive surveys conducted amongst these professionals, offers a unique view of the business transaction world. The 40th edition of this quarterly report was based on responses from 360 brokers and advisors collected between April 1st and April 15th, 2022.
A Glimpse into the Main Street Market
One interesting detail revealed in the latest report was the geographical preference of buyers. In the Main Street market, which typically features small businesses, approximately 70% to 80% of buyers resided within a 20-mile radius of their purchase. In contrast, buyers of larger companies are often found over 100 miles away.
The report also highlighted two prominent challenges businesses are currently wrestling with: labor shortages and supply chain disruptions. Labor issues are impeding organic growth, and supply chain complications could discourage potential buyers.
Current Buyer Demographics
The report suggests that Main Street buyers are a diverse group. They include first-time business buyers, who view owning a business as their primary job, and serial entrepreneurs eager to invest in another business after successful previous ventures. Notably, around one-third of buyers in the $500K to $1M range are serial entrepreneurs.
The survey also noted an influx of capital into the industry, primarily from private equity, family offices, and corporations. This trend is likely a reaction to the 2008-2009 economic downturn, which saw a severe restriction in bank credit.
A Favorable Environment for Sellers
The current market, according to the survey, favors sellers. Businesses are achieving record-setting multiples, and in Q1, nearly 97% of businesses were sold at their asking price. However, these favorable conditions may not last indefinitely, suggesting sellers should consider capitalizing on this window of opportunity.
Despite the strong sales performance in the previous quarter, a swift business sale remains unlikely. Even under the most favorable conditions, the business sales process typically extends over several months.
The market currently offers many advantages to sellers, including low-interest rates, active SBA participation, and a growing aversion to corporate employment. But waiting for the “perfect moment” to sell can be a mistake, as that moment may never come.
The recommendation, therefore, is to start preparing for the sale of your business as early as possible. Early preparation can greatly enhance the chances of achieving a positive sale outcome.
