Nervous buyers back off purchases of small businesses up for sale

00_hideproblemswasteThe Business Review (Albany) – by Michael DeMasi

The sour economy has put a damper on the sale of small businesses.

“Deals have gone down dramatically,” said Carl J. Cusano, a broker in Colonie and president of the New York Business Brokers Association. “But I’m a cautious optimist. I think it’s going to come back.”

The association doesn’t compile statistics on overall sales, but Cusano has seen a decline at his firm, Capital Business Advisors, and knows other brokers are closing fewer deals.

“There are guys in my industry hanging on by their fingernails,” he said.

Cusano said he closed five transactions in 2008, about half of what he normally does. The sales ranged from a small vending company to a fairly large boat dealership.

Sellers are confronting several obstacles, including buyers feeling nervous about the economy; losses in 401(k) accounts and home equity values that cut into cash available for purchases; and difficulty obtaining Small Business Administration-backed loans because of stricter lending standards.

“If you’re serious about selling, you have to consider seller financing because the banks aren’t handing money out as they were in years past,” Cusano said.

Another indication of the small business sales environment comes from a Web site, BizBuySell.com, which Cusano described as the “Wal-mart of listing sites for businesses.”

The median asking price for small businesses in the Capital Region during the fourth quarter of 2008 was $495,000, a 5.7 percent decline from the same period a year ago, according to the Web site. The median is the point at which half the prices were higher and half were lower.

The businesses for sale had a median revenue of $453,000, down 2.4 percent. Median cash flow was $133,757, down 10.8 percent.

The data is based on 70 businesses listed for sale during the fourth quarter of 2008, including those represented by brokers and for-sale-by-owner. There were 58 businesses for sale in the fourth quarter of 2007.

Cusano said it’s hard to know how the actual sale prices of businesses have changed in the area because of the way information is collected and shared on the private transactions. The brokers association is trying to develop a database with that sort of analysis.

“A majority [of sales] are never, ever reported,” Cusano said.

Nationwide, the number of closed transactions reported to BizBuySell.com in the fourth quarter of 2008 dropped 20 percent, from 1,541 to 1,232. The median sale price for properties sold through the Web site during the quarter was $177,500, a 5.4 percent decline.

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