Business Valuations at Record Highs in Q3 2021
As business performance rebounds, buyers are competing for strong performing businesses. That has led to an increase in the number of businesses that were acquired in Q3 of 2021. The number of closed transactions in the third quarter increased 17% over the previous quarter, and 11% from the same quarter in 2020, according to BizBuySell’s Insight Report, which tracks and analyzes U.S. business sale transactions. The report also includes an analysis of survey responses from over 2,000 business owners, business buyers, and business brokers.
2021 Seller Confidence Index
As the economy rebounds, sellers are returning to the market, feeling more confident they can sell their businesses for a good price and less willing to wait until the COVID pandemic is over. Seller confidence increased to 57 out of 70, up from 45 in 2020. This is the highest seller confidence level since the high of 58 in 2018. 49% of the respondents believe they can receive a higher sale price today compared to a year ago, and 46% of respondents said the top factor motivating their confidence was improved sales or revenue.
The average revenue for businesses sold in the third quarter was $671,000, up 6% from the same time last year. Meanwhile, buyers are paying record-high prices for businesses that have continued to perform well during the pandemic. The average sale price in the third quarter hit a new high of $350,000; that’s 17% above the previous year and 40% above pre-pandemic levels.
With current business valuations higher than they were pre-pandemic, many business owners are thinking now may be the right time to exit.
2021 Buyer Confidence Index
Buyers noted that there is a limited supply of profitable well-run businesses on the market and they regret missing out on buying last year while prices were lower. As a result, buyer confidence fell to 48 out of 70, down significantly from 60 in 2020 and slightly above the buyer confidence level of 47 in 2018.
It is interesting to note that demand for high-performing businesses is increasing. According to Rich Jackim, Managing Partner of Jackim Woods & Co., “buyer inquiries on our listings are up 33% since the same time last year. However, many business owners are putting off selling until their businesses fully recover, so the supply of profitable, well-run businesses is still limited. This is driving up values and makes it a sellers’ market.”
If you are beginning to think about selling your business and would like to explore your options, please contact Rich Jackim at rjackim@jackimwoods.com for a FREE, confidential, no-obligation consultation.
