If you’ve been thinking about selling your Colorado business, or becoming a small business owner in the state, now may be the time to take advantage of the wide selection of businesses up for sale.
According to the 2017 Q1 Insight report by BizBuySell.com, more Colorado businesses are for sale now than in 2016. That’s an increase of 11 percent, and they’re cheaper than a year ago too (down 19 percent from 2016).
For example, in the surrounding Denver metropolitan area, these are metrics from the first quarter of 2017:
- Businesses listed for sale: 496
- Median asking price: $275,000
- Median revenue: $500,000
- Asking price to revenue average: .72
- Median cash flow: $102,658
Why Small Business Sales are Increasing in Colorado & Nationwide
According to the year-end Insight Report from BizBuySell.com, 2016 was the healthiest year for business sales since they started recording this data in 2007. There were 7,842 businesses were sold last year. The 2017 Colorado business data shows 2017 is on track to outpace and beat 2016. In the first quarter of 2017, 2,368 small businesses were sold, which is an increase of 29 percent year over year.
But why is this happening?
BizBuySell attributes the growth in business sales to a healthy economy, strong business financials and access to financing. Demographically, the research suggests Baby Boomers are looking to exit small business ownership by capitalizing on the favorable market conditions. Younger buyers looking to purchase a small business are seeing healthy businesses with strong financials. Then are able to easily access the capital they need to purchase the business.
In addition, the data suggests the state of the small business sales industry is becoming more balanced in terms of fair market value. The median sale price for the first quarter of 2017 was $220,000 with the median asking price at $250,000. This means the average-sale-to-asking-price ratio is .92. It’s a very strong ratio that speaks to how both buyers and sellers are close to their assessment in what is fair market value for a United States small business.
How You Can Take Advantage of the Positive Small Business Sales Market
Buying a Business:
Determine the best type of business to buy: You should evaluate your background, education, experience, and personal passions. Don’t forget to keep in mind how much time you want to spend at your business and where you want it to be located. Then research your chosen market and business type to see what’s available and the asking price.
Figure out the value of the business you want to buy: Do a thorough research into business history and financials, in addition to business assets. It may be wise to hire a professional appraiser to help you.
Review the legal status, location and permits for the business: Make sure the owner has the legal rights to sell the business. And carefully comb through any issues that might crop up before your business can be operational.
Selling Your Business:
Prepare far in advance: It can take a while to gather documents, financials and everything you need to determine the price of your business. Then you will have to wait for the right buyer.
Increase profits: While you’re preparing to sell your business, do additional marketing or anything you can do to increase profits and customers. This can add value to your business.
Realistically price your business: Use online tools to understand what other businesses similar to yours in your area are selling for. It can be best to have a professional do an evaluation to determine your business’ value.