This article was written by Peter Siegel - BizBen.com, BizBen Index, reprinted by permission
California Posts Best Business For Sale Deal Total In Nine Years Says BizBen Index
Dublin, CA (January 14, 2015) With 15,513 deals on business for sale offerings last year, California saw its best rate of sales involving small and mid-sized businesses in nine years, according to the BizBen Index. The company said the figure was up 5% compared to the 14,764 sales completed throughout the state in 2013. An improved economy and easier access to business purchase loans were among the factors accounting for the growth.
"A sizable number of California's business owners who've been ready to sell for awhile, decided the time was right last year, because their companies were showing better performance than two and three years ago," said Peter Siegel, MBA, Founder and President of BizBen.com - a lot easier to make your case for a strong valuation when a business is showing improved revenues and an increase in profitability.
"Growth in the number of businesses for sale brought out unprecedented numbers of buyers who've been sitting on the sidelines the past few years, waiting for the economy to improve."
Siegel also said, "more and more lenders are getting back into the business for sale market after a long period following the mortgage crisis when they were hesitant to offer business purchase loans. That goes for financial institutions in the SBA lending network as well as banks and other companies with loan products not guaranteed by the Small Business Administration."
A third factor accounting for the increase in business-for-sale market activity, according to Siegel, is "smarter strategies being used by both buyers and sellers to solve the kind of problems that might have ruined their deals in the past. For example, we're seeing more earn-out provisions in sales agreements than ever before. That is a way to bridge the gap when the seller feels a business is worth more than buyers are willing to pay. The strategy is for parties to agree on a figure that will be temporary and might go up in response to improvements in a company's financial performance in the months and years following close of escrow. If the seller is carrying back part of the price, he can look forward to having the buyer's payments go up to correspond to the growth in the business."
A Slower December
Much of the gains in sales totals were achieved early in the fourth quarter last year, with a slight decline in the count of transactions last month. A total of 1,326, deals were completed during December 2014 compared to 1,403 business sales posted during the previous December. Among the winners in a December-to-December comparison were Orange County, with 165 sales last month vs. 140 for the previous December, Contra Costa County recording 57 deals in the just-completed month and just 30 sales the previous December, and Santa Clara, up to 65 deals from 60.
Large counties with a decline last month compared to December 2013 were Los Angeles County, 294 sales vs. 406; San Diego County with 102 deals vs. 128; and San Francisco posting 43 sales compared to 66 during December of the previous year.
The county totals recorded last month, available at: http://www.bizben.com/stats/stats-monthly-dec.php are as follows:
Alameda: 58, Amador: 2, Butte: 4, Calaveras: 1, Contra Costa: 57, El Dorado: 8, Fresno: 44, Humboldt: 2, Imperial: 5, Kern: 28, Lassen: 1, Los Angeles: 294, Madera: 1, Mariposa: 1, Merced: 8, Monterey: 19, Napa: 4, Nevada: 4, Orange: 165, Placer: 23, Plumas: 1, Riverside: 68, Sacramento: 38, San Bernardino: 59, San Diego: 102, San Francisco: 43, San Joaquin: 36, San Luis Obispo: 6, San Mateo: 21, Santa Barbara: 10, Santa Clara: 65, Santa Cruz: 6, Shasta: 12, Solano: 14, Sonoma: 31, Stanislaus: 23, Sutter: 6, Tulare: 18, Tuolumne: 3, Ventura: 19, Yolo: 9, Yuba: 2.
Sales totals posted by California county over the last nine years are available at: http://www.bizben.com/stats/stats-total.php
The BizBen Index has been collecting and reporting information about small California small business sales for 18 years, to help business owners/sellers, buyers and the professionals participating in this market make informed choices and achieve success when selling or buying a California small business.