This article was written by Peter Siegle, from his blog, April 3, 2013 reprinted by permission
The 434 deals for Orange County’s small and mid-sized business for sale offerings during the three months of 2013 represents the highest first quarter volume of business transfers for the county in five years. And the statewide total was 4,006 sales during the quarter, also a five-year record. But the figures still lag far behind pre-recession totals, according to business transfer figures collected from California Government records and other sources and reported by the BizBen Index.
"While the increase in the number of small business sales in the county and the state is a positive sign, it’s a mistake to believe we’re about to experience full recovery of the marketplace where California businesses are bought and sold. In other words, don’t expect activity in this market soon will return to ‘normal’," said Peter Siegel, MBA, Founder and President of BizBen.com, parent of the BizBen Index. "The combination of more baby boomer owners trying to retire, and an increase in the numbers of people trying to buy businesses as an alternative to the disappointing job market, should result in substantial increases in transactions. But California's small business buyers and sellers are just like participants in most other economic sectors who are trying to succeed in the ‘New Economy.’ It’s an economy in which many of our familiar methods of achieving our objectives are not as effective as they used to be.
Behind by 29%
Siegel noted that the first quarter figure of sold California businesses is up almost ten percent from the 3,652 transactions completed during the first three months of 2012. "But look at where we are, with four thousand deals, compared to the total of 5,643 transactions successfully closed during the first quarter of 2008! We still are behind where we were five years ago by 29%.
"This suggests that over the past five years, 29% of the growing population of baby boomer owners who wanted to sell their businesses have been unable to do so. And 29% of the increasing number of Californians unable to find secure and suitable employment--people who may have been able to take over those businesses--still are working for someone else or are among the 9.6% of the state’s workers who are unemployed."
Orange County Results
The BizBen Index reported 54 Anaheim business sales escrows were completed in the first quarter this year, and there were 39 transactions in Santa Ana, 35 deals in Irvine and 31 in Huntington Beach. Year to date totals for Orange County, found at http://www.bizben.com/stats/orange-county.php are as follows:
Anaheim: 54, Brea: 11, Buena Park: 17, Costa Mesa: 22, Dana Point: 3, Fullerton: 35, Garden Grove: 27, Huntington Beach: 31, Irvine: 35, La Habra: 14, Laguna Beach: 10, Lake Forest: 13, Mission Viejo: 8, Newport Beach: 14, Orange: 20, Placentia: 3, San Clemente: 16, Santa Ana: 39, Tustin: 15, Westminster: 13, Aliso Viejo: 1, Balboa: 1, Cypress: 5, Fountain Valley: 4, La Palma: 4, Laguna Hills: 1, Laguna Niguel: 4, Stanton: 4, Yorba Linda: 3, Foothill Ranch: 1, Rancho Santa Margarita: 3, San Juan Capistrano: 3
Overcoming Problems
"The good news is that more and more entrepreneurs are learning how to overcome some of the problems that have stalled business sales," said Siegel. "Smart buyers are dealing with what has been one of the major issues—access to capital needed to complete deals—by leveraging the rising value of their homes. Either they convert growing home equity directly into cash or use it as security to support bank, or seller ‘carry back’ loans.
"And a number of buyers are learning to draw on their retirement accounts for purchase funds or working capital without triggering a taxable event. But this is not a DYI project. The rollover of funds from a tax deferred account and used to buy a business needs to be done correctly in order to avoid taxes and penalties."
More details about this and many other strategies helpful in buying businesses in this challenging market are covered in Siegel’s just-released ebook, "Buying a California Business in the New Economy." It offers advice for buyers determined to find and buy a good business, and seeking useful information and ideas to help achieve that goal.
BizBen Index Sales Stats
For the just completed month, California sales total by county, found at http://www.bizben.com/stats/stats-monthly-mar.php, are:
Alameda: 101, Amador: 1, Butte: 3, Contra Costa: 26, El Dorado: 18, Fresno: 47, Glenn: 4, Humboldt: 2, Kern: 23, Lake: 3, Los Angeles: 389, Marin: 1, Mendocino: 5, Merced: 12, Monterey: 9, Nevada: 5, Orange: 177, Placer: 12, Riverside: 84, Sacramento: 33, San Benito: 1, San Bernardino: 99, San Diego: 157, San Francisco: 96, San Joaquin: 16, San Luis Obispo: 37, San Mateo: 34, Santa Barbara: 12, Santa Clara: 61, Shasta: 7, Solano: 14, Sonoma: 18, Stanislaus: 28, Sutter: 13, Tulare: 10, Ventura: 18, Yolo: 4.
Sales statistics by city and county throughout the state for the past four years are accessed at: http://www.bizben.com/stats/stats-total.php
