IMGCAP(1)]Small business sellers are more optimistic this year about the value of their business, while many buyers are less confident, according to BizBuySell‘s third Annual Buyer-Seller Confidence Index.
However, both buyers and sellers might be more confident in the market if Donald Trump is elected President, since 42 percent of sellers and 34 percent of buyers indicated that he is the candidate most likely to improve the small business environment.
“The idea behind the survey is to track sentiments about market conditions for both buyers and sellers,” said BizBuySell general manager Bob House. “And, since this is the third year for the survey, we’re now able to compare trends and project trajectories on buyers and sellers.”
The survey polled more than 1,500 people currently interested in buying or selling a small business to gauge their confidence in today’s market, House indicated.
This year’s results showed sellers feeling more confident that they can successfully exit their businesses as the Seller Confidence Score grew to 62 after two consecutive years at 56. “Anything over 50 is a positive for confidence, while under 50 shows less confidence,” said House.
“A separate score is calculated for both current small business owners interested in selling, and prospective buyers currently exploring the market,” he said. “Each group’s score can range from 0 to 100, with 100 representing a perfect environment bur buying or selling a business.”
“Not only did a majority of owners (58 percent) believe they can receive more money for their businesses than they could last year, but more than 90 percent were optimistic enough to say they will be able to achieve the same or higher sale price next year,” House said.
Sellers also indicated an increased number of buyers in the market this year. When asked to identify the biggest issues limiting their ability to sell, just 12 percent said they couldn’t find a buyer—a significant drop from the 27 percent who indicated a shortage of buyers in 2014. Perhaps even more importantly, 43 percent of sellers said they have no issues and could successfully exit their businesses right now, compared to just 23 percent who felt that same level of confidence last year.
“Small business owners are definitely viewing today’s market as a great opportunity to sell,” said House. “However, buyers are slightly less confident. The Buyer Confidence Score dropped from 52 in 2014 to 47 this year. Recent volatility in the U.S. and Chinese stock markets was likely fresh on the respondents’ minds when they completed the survey, and the fear of economic instability may have contributed to their skepticism."
“Buyers also seemed to believe that seller asking prices are too high, with 57 percent reporting that small businesses are currently overvalued,” he added. “It makes sense that for many of the same reasons sellers are becoming more optimistic, buyers are growing a bit more cautions.”
The survey also addressed recent efforts at raising the minimum wage, and respondents’ views on presidential politics.
“Not surprisingly, more owners are against a higher minimum wage than buyers,” House said. “Sellers are a little more educated on the issue and are largely opposed to it, while buyers are more evenly split.”
The survey found that 64 percent of owners were against a higher minimum wage compared to 36 percent in favor. Just over 38 percent of buyers said they are against a higher minimum wage, while a close 35 percent said they are in favor.
“Buyers may view the minimum wage issue as an opportunity to drive down asking prices, since more than half of prospective buyers surveyed admitted that a higher minimum wage would decrease the value of a business,” said House.
In presidential politics, Trump is the clear favorite for both prospective buyers and sellers as the candidate most likely to improve the small business environment, with 42 percent of sellers and 34 percent of buyers favoring him. Hillary Clinton was the next most popular candidate for both groups, at 13 percent and 16 percent, respectively. Bernie Sanders rounded out the top three for buyers and sellers at 10 percent and 8 percent, while the remaining Republican candidates all polled at less than 6 percent.
“It’s still early in the election cycle, and Trump may have benefited from brand awareness in a crowded field,” posited House. “We don’t know if it will hold up.”
