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Why Small Businesses Are Expected to Be a Hot Commodity in 2019

A combination of a stronger economy and healthier companies helped lift sales prices for businesses.

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small businesses as hot commodity

PHOTO CREDIT: Getty Images

Small businesses sold at a record pace in 2018 and are expected to remain a hot commodity this year., an online market for small businesses, counted 10,312 sales transaction reported by brokers in 2018, up 4 percent from 9,919 in 2017 and 31 percent over 7,842 in 2016. All three totals have been the highest since began tracking sales in 2007.

In a survey of current business owners asking why business sales keep rising, half the participants said retiring baby boomers continue to put their companies on the market, extending the trend that began back in 2013. With more baby boomers reaching retirement age -- boomers are considered to be people born between 1946 and 1964 -- it's likely they'll continue to seek buyers for their businesses.

Many buyers are interested in companies because they want to be their own bosses, said. Already established companies are also in the market for small businesses; many are looking to expand their staffs through acquisitions because they're struggling to find qualified job candidates in a tight labor market.

The combination of a stronger economy and healthier companies lifted sales prices for businesses, said. The median sales price in the transactions it counted was $249,000 last year, up 9.3 percent from $227,880 in 2017. Eighty-six percent of the brokers predicted sales prices would be in the same ballpark or increase in 2019.

Forty-five percent of the companies sold were restaurants or retailers, and 41 percent were service providers. Four percent were manufacturers, and an assortment of other industries accounted for the remaining 10 percent. With consumer spending having been strong in recent years, businesses that cater to consumers have been more attractive and in turn have commanded higher sales price.

Companies going on the market are healthier than in past years, says. The median revenue of companies sold last year was up 6.3 percent to $531,653 from $500,000 in 2017. Cash flow, which indicates how well a company will be able to pay its bills, also gained, rising 4.3 percent to $120,000 from $115,000 in 2017.

--The Associated Press

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