Performing Businesses are an Endangered Species
Small, consumer-facing businesses in San Jose CA, Santa Clara CA and all over the country have been disproportionately affected by the pandemic. These smaller Santa Clara County CA business types include restaurants without the benefit of outdoor dining, salons, theaters… and the list goes on. Although our business brokerage San Jose CA office has found that these impacted businesses are sellable in this market, it’s only at a risk-adjusted price for willing Bay Area CA Buyers.
Case In Point
In spite of COVID, some small businesses have thrived in 2020. Through our business brokerage San Jose CA office, I recently sold a small music school which successfully pivoted to online Zoom-based lessons as COVID initially threatened their otherwise strong and predictable recurring revenue model. The company was able to maintain 2020 revenues roughly equivalent to 2019 performance. The Buyer interest in this business was spectacular, resulting in a closed transaction at full asking price.
Performing small businesses have genuinely become an endangered species, and the economics of supply and demand apply as one might expect. When the supply of performing businesses decreases, their value increases. BizBuySell generates quarterly Insight Reports. For Q3 2020, the cumulative number of completed small business transactions dropped by 15.9% as compared to a year ago.
And yet, with fewer completed transactions, it’s interesting to note that the median sale price of businesses sold in the 3rd quarter was $299,500, a 19.8% increase from a year ago.
Asking prices also saw a 17.6% spike to $327,000 from $299,500. BizBuySell published the following commentary: “With many businesses negatively impacted by the pandemic, buyers with means are paying a premium for resilient businesses that are thriving well past pre-pandemic levels. At the same time, the impacted businesses which would have sold prior to the pandemic are now having a challenging time or staying on the sidelines altogether.”
When is the right time to sell a business through your local business brokerage San Jose CA office? If you’re an endangered species that has performed well in 2020, the time is now.