The entire article – titled “Small Business on the Discount” – should be read, but a few points are worth highlighting here:
• To all the usual reasons that small businesses are put up for sale — personal problems and personnel squabbles among them — add economic woes this year. But even as for-sale listings rise around the country, so is buyer interest… The problem, though, for owners seeking to sell their businesses is that prices appear to be softening — a reflection of a variety of causes, among them tighter credit markets, rising costs and fewer customers.
• Retirement, illness, divorce, death — and simple burnout — still drive the majority of owners to sell, but in the rocky economy, some otherwise solid businesses are now having a hard time. Their owners decide they cannot hold out for better times, so they sell for less, business brokers say.
• In a survey by the International Business Brokers Association of its 2,000 members, nearly 73 percent predicted that 2008 would be a buyer’s market. The survey was released in January.
Cress S. Diglio Sr., the association’s chairman and president of Corporate Investment International, which is based in Orlando, Fla., said that “this year the number of sellers will easily outpace the number of qualified buyers.” One reason is that a crucial small business financing tool, home equity lines of credit, has been drying up as house values fall. Traditionally, small businesses have had a hard time obtaining commercial credit, and that is worsened in rough economic times, several brokers said. “A year ago, people were using home equity loans,” Mr. Hottes said. “And now they are drawing down their 401(k)s.”
• [A]n unpleasant truth is that many, if not most, businesses do not sell. For decades, the conventional wisdom was that brokers sold about one out of five businesses they listed. But a new study by Louis O. Vescio, owner of Sunbelt Business Brokers in Melbourne, Fla., found that the percentage was only 10.5 percent.
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