IQ: 2010 Could Be Better Year for Small-Business Sales

Small-business owners may have better luck selling their companies this year as the economic recovery gains steam, according to a new survey.

Seventy-six percent of brokers nationwide responding to a survey by BizBuySell.com, an Internet marketplace for small businesses, believe that 2011 will be a “good year to sell.”

However, most brokers who responded say they do not believe transaction volumes will return to pre-recession levels for at least another 18 months.

Most brokers who say the selling season is heating up now though—69 percent—cite the recovering economy as the reason. Other top reasons for optimism include “more businesses coming on the market” and “better financing becoming available for business buyers.”

As in earlier surveys conducted in July and November of 2010, a lack of financing continues to be the most common factor that keeps small-business transactions from closing. Nearly half of the brokers surveyed, 48 percent, cited financing as the biggest issue hindering business for sale transactions.

Legislative changes, such as the Small Business Jobs Act, which were designed to provide cheaper financing to small businesses and raise limits on small-business loans, seemed not to influence whether business owners want to sell. A full 62 percent of brokers surveyed said that the legislation had no impact. Some respondents suggest that many small-business owners may be unaware of the changes because they are too busy to keep up with the latest information.

Another issue leading to stagnant small-business sales, cited by 26 percent of brokers, is that sellers have been holding firm on their selling prices.

The extension of the favorable long-term capital gains tax rate is having a slight effect on the business-for-sale market in 2011, but the survey suggests that it is more likely to be a driving factor for business owners looking to sell within the next few years. More than half—54 percent—of the brokers surveyed noted that the extension will have little effect on the market this year, but, as one respondent notes, “sellers are unsure of what the rate will be after 2012, so many are positioning a sale within the next 2 years.”