Business Lessons from 2021
After a dormant year for selling your business in 2020, business sales transactions in 2021 increased by 14 percent despite the continued economic damage caused by the COVID-19 pandemic. The double-digit growth in business sales occurred despite an economic climate that included a much-depleted labor force and supply chain disruptions that forced ships to spend as long as several months at sea waiting to dock at a port of entry in the United States. Much of the 14 percent gain in business-for-sale transactions in 2021 occurred in the fourth quarter, which saw business brokers handling an increase in the sales of businesses.
The Insight Report released by BizBuySell demonstrates the strong impact the federal government has in facilitating the sales of businesses of both small and medium-size. Lending by the Small Business Administration (SBA) generated an increase in the valuation of business deals to an annual average record high of $325,000 per deal. As the COVID-19 pandemic refused to release its hold on the American economy, small and medium businesses that generated a positive cash flow with revenue growth attracted a large percentage of buyers.
Strong Demand for Profitable Businesses
Despite the near-historic number of business closings in 2021 that resulted from the financial devastation caused by the pandemic, there was a strong demand for profitable businesses which drove the market regarding business sales. Even with the end of the predictability of business operations and sales, business brokers throughout the United States reported an increase in the number of profitable businesses for sale.
The acute labor shortage that followed the economic fallout of COVID-19 made reliable employees an important asset in the valuation of businesses for sale. Buyers of small and medium-sized businesses started to view employees as an asset that required valuation in the sales price. The importance of reliable employees became a part of a short-term business model that allowed profitable businesses to sell for a premium. Businesses that had the ability to adapt to the rapidly changing business environment especially benefited from the economic chaos caused by the COVID-19 pandemic.
Strong Demand, Limited Supply
One of the most important lessons learned from 2021 concerned one of the most fundamental economic principles: Supply and demand. Buyers of businesses had a limited number of options because a large majority of business owners focused more on financial recovery than unloading their assets. Pandemic-related financial challenges prevented many business owners from following through with plans to sell their businesses. If you planned on selling your business before March of 2020, the onset of the pandemic probably forced you to make a significant change in direction that focused more on staying financially afloat than finding the right buyer.
Preparing for the Future
If 2021 taught business operators anything, it was to prepare for unexpected bad news that either delays or postpones the selling of a business. The Omicron variant, which hit during the warmer months of the year, forced more business owners up for sale to reconsider selling assets or outright selling their businesses. Business owners that intended to sell their businesses before the pandemic started seeking prospective buyers once the Omicron variant began to wane in influence on the American economy.
Sunbelt markets over 200 business for sale portals, and we spend a lot of money marketing your business for sale which is why we are so selective about the listings we present. We offer custom deal structures, dedicated financial advisors, and compelling marketing assets that get our customers the best price for their business. Sunbelt takes the time required to pre-screen every buyer by establishing a profile and receiving a Personal Financial Statement (PFS). Because we do the original legwork, you get a head start on selling your business.
Contact Sunbelt Business Brokers of Naples for a free valuation & consultation.