Selling a Business: Market Update
21 July 2025: Selling a Business: Market Update
As with every industry, ours has its various “keepers of statistics”.
Early this year we posted about a report purportedly showing the number of businesses that FAIL to sell (and why they fail to sell). It laid a lot of blame for these manifold failures on the individuals that tried to sell them but who are untrained in the profession – namely real estate agents.
This past week, another report dropped. This one issued by a firm styled BizBuySell, a large online marketplace. BizBuySell is effectively a “multiple listing service” for business brokers. We’ve used it for years. They issue regular reports that are often summarized by various business journals. One such summarization of their most recent report is the basis for this post.
The Basics
The basic takeaway is that, based on Q2 results, small businesses are still changing hands, but buyers had become more cautious.
According to BizBuySell, the number of transactions declined about 4% compared to the same period last year. “Buyers appear concerned about higher interest rates, tougher loan rules, and overall economic stability. With fewer businesses selling, the median sale price also fell by 6% on a year-over-year basis.”
A
couple of years ago, we posted about the impact of rising interest rates on sellers. Our position was – and remains – that rising interest rates impact the return a buyer will see on their investment. As such, rate increases certainly impact seller. The higher rates are, the greater the expense of servicing the acquisition debt. All other things being equal, the greater the debt service expense, the lower the Discretionary Earnings. If the buyer requires a certain return on his/her investment, rising rates must therefore be reflected in lower valuations.
This would certainly impact sellers and could be one reason for the decline in the median sale price.
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Still, BizBuySell says the pool of buyers is “…still growing as more people look to escape corporate life, viewing small business ownership as a path toward greater autonomy. Nearly half of all buyers last quarter claimed to be corporate refugees, up from 36% last year.” (Italics, mine.)
But this significant increase in buyer interest notwithstanding, the time it took to sell a business “jumped”.
Businesses stayed on the market for about 12 days longer this past quarter, reflecting (according to the report) “…heightened caution and more thorough due diligence on the part of buyers”. There is some speculation that this has to do with the Trump administration’s tariff push, which began to take shape on April 2nd.
But sellers should be aware of the general rule that “properly-priced” businesses usually take between six and 12 months to sell. (As illustrated in this post, “improperly-priced” businesses could take forever.) Twelve additional days may be significant at the macro end of the market but it would be relatively meaningless in the upper Main Street and lower Middle markets.
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Further complicating selling a business are the new, tighter lending guidelines from the Small Business Administration that went into effect in June.
“Obtaining SBA loans, a common way to finance small business acquisitions, has become more difficult. Recent SBA rules require increased documentation, tighter scrutiny of valuations, and a minimum buyer equity contribution of 10% (a seller note can now only cover half of this requirement). These changes particularly impact first-time buyers who may struggle to meet the higher equity requirements.”
Note that the issues the report focuses on in this section relate to valuation and financing.
Math: It’s Really Simple!
Selling a business without having it valued – or an owner trying to get an unrealistic premium over value – will mean owning one that is very unlikely to sell. This should be a very simple concept to grasp. Expecting the SBA to sign off on a $1 million loan guaranty without a professional valuation and reams of supporting documentation is tantamount to asking your parents for $20,000 to buy a car without telling them what kind of car it is.
And the mention of the SBA now requiring a 10% “equity contribution” (government-speak for “down payment” shouldn’t surprise anyone. If I was asked to loan somebody money to buy car, I’d certainly want them to have some skin in the game. In fact, I’d want them to have at least 25% to increase the odds they’d show up for work in the morning!
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REALTORS! Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to accurately value and successfully sell businesses.
Don’t Miss Out on the “Silver Tsunami”!
It’s worth noting that the SBA is willing to allow a seller note to “…cover half of this requirement”. This suggests two important points:
- There will almost certainly be some amount of seller financing.
- The buyer can credit some percentage of that financing to offset his/her cash requirement.
Some amount of seller financing is generally part of the vast majority of small business transfers and getting your business “pre-qualified” by the SBA will make it easier to sell. (There are several SBA specialists – “Premier SBA Lenders” – in The Brokers Roundtable℠. Join to speak directly to any of them.)
Where’s the Action?
As is the case in nearly any financial environment, certain sectors remain robust.
Service-oriented businesses, including healthcare, construction, and home services – particularly those sectors with recurring revenue such as IT companies – continue to attract buyers due to reliable, and, possibly tariff-resistant earnings. We receive no fewer that five inquiries a week from buyers looking for such acquisition opportunities.
However, on the other end of the sector spectrum there are some problems. “Manufacturing businesses saw a 28% decline in transaction volume and a 7% drop in median sale price.” My guess is that this may reflect concern about the Trump administration’s push for tariffs. But this morning’s Wall Street Journal published several items suggesting trade agreements have been reached with the European Union.
The report concludes:
“Given all the current economic and tariff uncertainty, the numbers in this report are hardly alarming. But the small business market often lags behind broader economic shifts, and it may take some time to catch up. Whether it’s a perfect comparison or not, the stock market has already shaken off its tariff jitters and is back at all-time highs. With further clarity on tariffs, and, perhaps, a coming interest rate cut from the Federal Reserve, small business valuations and deals may see their own bounceback in the third quarter.”
The Bottom Line
When discussing selling a business and the state of the “business-for-sale” market, it’s worth keeping in mind what we refer to as the “Silver Tsunami”, the number of Baby Boomer business owners deciding to head for the exit. We’ve discussed this phenomenon on many occasions on this blog over the years, initially here. We’ve posted repeatedly about the number of businesses expected to come to market over the next 10 years. More businesses available to buyers mean that sellers must realize they have competition.
We often advise business owners to remember that their’s is not the only restaurant, HVAC company, printing business, distribution operation, etc, etc., that is available and that we have to be competitive when pricing the business as well as when negotiating terms. There’s plenty of opportunity out there.
“You cannot afford to make the mistake of thinking you cannot be replaced.”
– Frank Irving Fletcher
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
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The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at
jo*@Wo*******************.com