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You might want to wait to sell your business

Think selling a house here is tough? Try selling a small business.

The median asking price for businesses for sale in the Tampa Bay area stands at $195,000. A year ago, at the end of the second quarter of 2008, the median asking price was $225,000.

"Clearly, this is the worst market for selling a business since we've been tracking quarterly data these two and a half years," says Mark Handelsman, general manager of BizBuySell.com, a national online business-for-sale marketplace based in San Francisco and part of LoopNet Inc.

BizBuySell boasts an inventory of more than 50,000 businesses for sale. More than 850 of those are based in the Tampa Bay area. The anemic sales climate for these businesses feels a lot like the climate for home sales.

Sellers still want too much. Buyers still offer too little.

No surprise, fewer deals nationwide are getting done. Year over year, Handelsman says he has seen a 50 percent drop in completed business sales. He cites two reasons for the sharp dropoff.

Many business owners are holding off on selling until the economy recovers. And thanks to tight credit conditions, buyers are finding it much tougher to find the financing to get a deal done.

"Even buyers trying to borrow money against their homes are finding it more difficult," Handelsman says.

In the three months ended June 30, 48 Tampa Bay area small businesses were sold at an average sales price of $120,000, down from their $127,000 average asking price. Some samples:

• An English pub in Pinellas County (asking $1.9 million, sold for $1.1 million).

• A Pasco maker of firearms accessories (asking $283,000, sold for $281,000).

• A Hillsborough office park deli/cafe (asking $22,000, sold for $18,500).

• A Pinellas liquor store (asking $675,000, sold for the same).

For the sake of nearby comparison, in an analysis of 37 completed business sales in Orlando in the second quarter, transactions averaged just $80,000, or 85 percent of their asking price.

In this economy, some types of small businesses naturally outdo others.

"Businesses that do better tend to depend less on discretionary income," Handelsman says. A high-end restaurant is less likely to succeed these days, for example, than a Subway sandwich franchise. And what of a health care service business that helps get the elderly to their dialysis appointment? "Those customers still need to get there," he says.

A big shift in the business-for-sale market is the sharp increase in seller financing. Before the credit crunch, a buyer typically would come up with 10 to 30 percent of the asking price in cash, then get a loan from a bank or the federal Small Business Administration for the rest.

No more. Handelsman says loans are harder to come by, forcing sellers to offer financing, typically loans ranging from three to five years. So a buyer offering 20 percent cash now might get an SBA loan for only 50 percent of the price, with the seller lending the remaining 30 percent.

There is a silver lining in all this, at least for the Tampa Bay area. While completed sales of businesses are down dramatically nationwide by 50 percent, BizBuySell figures show completed sales slipped only 20 percent in the Tampa Bay area in the second quarter compared with a year ago.

That puts the Tampa Bay area No. 3 in the nation, behind No. 1 Dallas and No. 2 Las Vegas, among metro areas most recently suffering the smallest declines in business sales.

Now, a 20 percent drop may not sound worthy of bragging about. But it sure beats places like Atlanta (down 62 percent), Miami (down 69 percent) or the country's worst metro area — Raleigh, N.C. — down a surprising 89 percent in the quarter from a year ago.

Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405

You might want to wait to sell your business 07/18/09 [Last modified: Saturday, July 18, 2009 4:31am]
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