According to the recent insight report released from

In Q1 2023, the volume of small business acquisitions increased by 4.8% compared to the previous quarter. Despite being lower than the previous year, the median sale prices of businesses rose by 1.4%, while median revenue and cash flow increased by 6.7% and 2.8%, respectively. The rise in transactions may be due to delayed SBA loan processing, an increase in sellers ready to move forward, and a rise in online traffic. As a result of higher interest rates, buyers are negotiating lower prices for acquisitions, placing pressure on business values. Nearly one-third of business owners are accelerating their plans to exit their businesses, with retirement being the main reason. However, the market favors buyers, and sellers need to consider their best options for arriving at a favorable price.

Business Market’s Shifting Tides

Many sellers looking to secure their retirement nest egg may be more willing to negotiate prices rather than risk being in a weaker position. Additionally, with buyers facing higher acquisition costs, asking prices seem less reasonable, causing 42% of buyers to delay their purchase timeline. The market has shifted in favor of buyers due to rising SBA and commercial real estate rates, as well as a shift toward more owners aged 55+ selling their business entities. Interest rates are not favorable for buyers right now, and seller financing could be more attractive for a buyer if the terms can beat out a bank’s proposed rates. During Q1 2023, businesses with a selling price of $1 million or more had a median cash flow of $560,473 and remained on the market for 211 days, compared to businesses with a deal size under $1 million which had a median cash flow of $125,348 and were on the market for 176 days.

Percentages Paint Business Outlook

The small business market is expected to continue facing challenges from inflation and higher interest rates, but the labor market is adapting to the changing economic conditions. Many business owners believe that the economy is slowing down, with 40% believing that the US is already in a recession, and 36% predicting that the country will enter one this year. While the pandemic may have spurred more people to take a closer look at what they want to do in their working lives, inflation and recession remain the top concerns for business owners. Restaurants, in particular, are feeling the pinch of rising food prices and are struggling to hire qualified staff. The service industry accounted for 46% of larger acquisitions, followed by retail, manufacturing, and restaurant sectors.


JC Myer is the Operations Manager with Sunbelt Business Brokers. He can be reached at (408) 436-1900, or at [email protected]