COVID-19 Rocks the Business-for-Sale Market

A terrific new insight report by BizBuySell sheds new light on the small business for sale market during COVID-19. While the report focuses on the U.S., we at BuyAndSellABusiness.com have noticed many similarities in Canada, most notably the unique opportunities and uncertainty that have arisen recently.

Here are my key takeaways:

1. Buyer confidence reached a record high this year of 60 (up 13% YoY). Confidence index scores range from 0 to 100, with 50 representing neutral confidence and 100 representing complete confidence in the market.
2. Seller confidence fell as a majority saw their business valuation drop due to the impact of the pandemic.
3. Digital transformation is critical. In a case study, Emmet Apolinario of Sunbelt Mergers & Acquisitions pointed out that one bakery took six weeks to implement an online ordering system. Likely as a result of their delay adapting, they were forced to close and now they’re under contract to be sold.
4. While opportunistic buyers may be expecting deals, the most sought-after businesses are “essential.” They are pandemic-proof, performing well and unlikely to come at a discount.
5. Owners are trying to sell right now, thinking businesses are valued at 2019 levels. COVID has changed all that. There is too much uncertainty to justify those asking prices. Yet, the median asking price of businesses currently listed at BuyAndSellABusiness.com is $384,000, 12% higher than a year ago.
6. In recent years, business-for-sale supply has been fueled by retiring Baby Boomers. The lion’s share of those businesses have yet to hit the market. Complicating matters, a majority of this demographic have seen their business decline since the onset of the pandemic and have adjusted their exit timeline as a result.
7. Time on the market for listings is also increasing because sellers are trying to maximize value of their pandemic-impacted businesses. But many buyers are looking for opportunities to buy businesses at a discount as a result of the pandemic.

Many in the business-for-sale space believe 2021 will bring the perfect storm for business sales. With each passing day, more Canadians turn 65 (one in five will be 65 or older by 2024), many of whom are business owners with excellent businesses. The pandemic has been a signal for the owners to let someone else steer the ship and continue their legacy.

So, what can you do as a buyer or seller?

Stay focused and disciplined on finding and building not only a valuable business but a sellable, pandemic-proof business. Sellable businesses have great timing and align with social, economic and technology trends. Sellable businesses are self-sufficient – meaning they aren’t dependent on a particular stakeholder, and sellable businesses have strong and healthy financials. Commit to finding and/or building a business that fits this framework and 2021 may be the perfect year to buy or sell a business or franchise.

Opinions expressed here by Contributors are their own.