Looking to purchase a bar in this economy? It seems like others might be in the same market. But is now a good time? BizBuySell.com, an Internet marketplace for buying or selling a small business, released the third quarter 2010 economic data for bars and taverns, showing that recovery is happening in the industry — albeit slowly. BizBuySell.com’s Third Quarter 2010 report shows that third quarter numbers look promising compared to last quarter and even last year.
“These results are very interesting,” Mike Handelsman, group general manager for BizBuySell.com and BizQuest.com, says. “This data shows that the bars/taverns category isn’t feeling the pain of the economy like most business establishments.”
Handelsman says the numbers are strongly positive because the median sales and asking price is up from last quarter, as well as the sales to ask ratio. The median sale price for Q3 is $245,000 compared to $157,500 in Q2 and $225,000 from the third quarter of 2009. The median asking price is also higher at $287,000 compared to $199,000 from last quarter and $225,000 from Q3 of 2009. The sales to ask ratio shows people are paying 96 percent of the asking price. This means, if you’re looking to sell your business, you’ll likely get almost your asking price, although that price may be lower than it would be in a better economy; conversely, if you’re looking to buy, be prepared to pay almost what the seller is asking for, but also note that it still could be a good deal.
However, the problems within the small business industry persist, as business owners find it more difficult to sell. A BizBuySell.com survey shows 49 percent of brokers saying lack of capital available is the primary cause of declining transactions, which leads to business owners lowering the selling price.
Possible positive signs of recovery may come from the Small Business Jobs Act, though 85 percent of brokers surveyed by BizBuySell.com do not expect to see higher transaction volumes or even a return to pre-recession levels for at least 12-18 more months.
Looking ahead, Handelsman says it’s too early to tell what the numbers will show in Q4 because business transactions are usually down during the holidays. However, he hopes to see “an improved business for sale market, more economic stimulus and more capital available for purchase of small businesses.”
“Overall, what we’ve seen over the last 2 ½ years is that it’s been a tough market for businesses to buy and sell. A lot of businesses are struggling, so they hold off on selling,” he says. “On the buy side, unemployment is high but there’s not a lot of capital for business owners to buy.” He predicts things will get better in the future but likely at a slow pace — but right now, every little bit helps.