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Who Is Behind the White Hot SMB Business-for-Sale Market?

An online business-for-sale marketplace reports record-breaking SMB sales prices and transactions, highlighting a positive start to 2018. Here is a look at the small business owners behind the white hot business-for-sale market.

SAN FRANCISCO — The online business-for-sale marketplace, BizBuySell, has released some interesting demographics data about small business owners and buyers to better understand the people behind the sizzling business-for-sale market.

BizBuySell‘s latest Insight Report, which aggregates statistics from business-for-sale transactions as reported by business brokers nationwide, shows that small businesses sold for a median sale price of $245,000 in the first quarter of 2018. That marked the highest sale price since the company, based here, began tracking the data in 2007, as well as 3.4% increase from a year ago.

The median asking price of sold businesses also hit a record high at $262,000, a 4.8% increase from 2017. Although business owners are getting more for their business, it does not necessarily indicate a sellers’ market. BizBuySell cites a 0.92 sale-to-asking price ratio, indicating buyers are willing to pay higher prices but that may be due to the financial stability attached to these businesses and a strong optimism for continued growth.

Although BizBuySell does not include specific data about individual industries, Ron Davis, principal of Davis Mergers and Acquisitions Group, sees parallels to the alarm industry in the overall SMB market performance.

“It’s amazing how the statistics from BizBuySell compare with our own statistics. Last year, our firm handled over $100 million in combined transactions, with two of the largest transactions making up 70% of that number.

“We, too, feel that it is not quite a sellers’ market, but very close to it. While our average deal is considerably higher than those reported to BizBuySell, we feel that it reflects the markets that we’re in rather than an anomaly in deal prices,” says Davis, who pens SSI’s “The Big Idea” column.

Typically, even among small alarm companies, transaction sizes would be closer to $500,000 rather than the numbers reported in BizBuySell, Davis explains.

“The alarm industry is going through a rather vigorous shift from traditional alarm systems to do-it-yourself [DIY] systems, mass marketing systems, as well as complete home automation systems,” he continues. “We expect the trend we have been experiencing to continue through this year, and well into 2019.”

The company’s demographic study, based on a survey of 2,300 small business owners and buyers, examines the most used marketing practices in small business, among other topics. Here’s an overview of the results:

Small Business Owners

  • Gender:
  • Male – 78%
  • Female – 22%

Age:

  • 20 to 29 – 3%
  • 30 to 39 – 11%
  • 40 to 49 – 27%
  • 50 to 59 – 34%
  • 60 to 69 – 19%
  • 70 or older – 6%

Highest Level of Education:

  • Some high school – 2%
  • High school graduate – 7%
  • Some college – 22%
  • College graduate – 36%
  • Trade/technical/vocational training – 5%
  • Some post-graduate work – 5%
  • Post-graduate degree – 22%
  • Other – 1%

Military Status:

  • Active duty – 1%
  • Veteran – 11%
  • Reserve – 1%
  • National Guard – 1%
  • No military experience – 86%

Ethnicity:

  • White/Caucasian – 71%
  • Hispanic/Latino – 6%
  • Black/African American – 7%
  • Asian/Pacific Islander – 11%
  • Other – 5%

Political Affiliation:

  • Democrat – 13%
  • Republican – 34%
  • Independent – 22%
  • Libertarian – 4%
  • Green – 0%
  • Undecided – 26%

United States Citizenship Status:

  • Natural born citizen – 65%
  • Naturalized citizen – 18%
  • Permanent resident – 12%
  • Visa holder – 2%
  • Applying for permanent status – 1%
  • Other – 1%

Of those not of natural born citizenship, 48% percent are first-generation U.S. immigrants; 10% are second-generation. India (1), China (2), Pakistan (T3), Republic of Korea (T3), United Kingdom of Great Britain and Northern Ireland (T5) and Mexico (T5) were the most commonly selected countries or origin.

Percentage of Business Owners whose Parents and/or Grandparents Owned a Business:

  • Parents owned a business – 29%
  • Grandparents owned a business – 10%
  • Parents and grandparents owned a business – 16%
  • Neither parents or grandparents owned a business – 41%
  • Unsure – 4%

Marital Status:

  • Single, never married – 10%
  • Married/domestic partnership – 75%
  • Widowed – 2%
  • Divorced – 13%
  • Separated – 1%

Children Under the Age of 18 Living in Household:

  • None – 57%
  • One – 17%
  • Two – 17%
  • Three – 5%
  • Four – 2%
  • More than Four – 1%

Household Income:

  • Less than $50,000 – 11%
  • $50,000 to $74,999 – 15%
  • $75,000 to $99,999 – 14%
  • $100,000 to $149,999 – 25%
  • $150,000 to $199,999 – 15%
  • $200,000 to $249,999 – 9%
  • $250,000 to $350,000 – 5%
  • More than $350,000 – 6%

Full-time Equivalent Employees:

  • None – 23%
  • 1 to 5 – 51%
  • 6 to 10 – 12%
  • 11 to 20 – 7%
  • 21 to 50 – 4%
  • 51 to 99 – 1%
  • 100 to 249 – 1%
  • 250 or more – 1%

Years as a Business Owner:

  • Less than a year – 10%
  • 1 to 2 years – 14%
  • 3 to 5 years – 21%
  • 6 to 10 years – 17%
  • More than 10 years – 38%

How Came into Business Ownership:

  • Started business from scratch – 64%
  • Business was passed down from relative – 4%
  • Purchased an established business – 21%
  • Purchased an established franchise – 3%
  • Purchased a new franchise – 4%
  • Other – 3%

Most Challenging Part of Purchasing a Business (of those who bought a business):

  • Finding the right business – 40%
  • Coming up with the down payment – 8%
  • Getting approved for financing – 10%
  • Negotiating the price with the previous owner – 12%
  • Understanding how much the business should be valued at – 23%
  • Other – 7%

Small Business Marketing Usage Rates:

  • Social Media – 62%
  • Direct Mail – 24%
  • Newsletter – 15%
  • Events – 26%
  • Content (Blogs, Whitepapers, etc.) – 15%
  • Email – 50%
  • SEM (Search Engine Marketing) – 16%
  • SEO (Search Engine Optimization) – 27%
  • Paid (PPC, Display Ads) – 19%
  • Print Advertising – 26%
  • Print Brochures – 24%
  • None of the Above – 19%

Social Media Platform Usage Rates (of owners who use social media to market their business):

  • Facebook – 87%
  • Twitter – 34%
  • Instagram – 38%
  • Reddit – 3%
  • Snapchat – 7%
  • Google + – 38%
  • LinkedIn – 43%
  • YouTube – 21%
  • Pinterest – 13%
  • Yelp – 27%
  • Tumblr – 3%
  • Other – 6%

MISC.

  • 32% of current business owners plan to sell their business within the next 2 years
  • 54% of current business owners have previous business ownership experience
  • 37% of current business owners are concerned about how they store & handle customer data, in light of Facebook’s data breach
  • 60% of current business owners do not believe small businesses as whole are equipped to protect internal data.

… and here is a look at Small Business Buyers:

Gender:

  • Male – 77%
  • Female – 23%

Age:

  • 20 to 29 – 4%
  • 30 to 39 – 19%
  • 40 to 49 – 29%
  • 50 to 59 – 32%
  • 60 to 69 – 13%
  • 70 or older – 2%

Highest Level of Education:

  • Some high school – 1%
  • High school graduate – 8%
  • Some college – 22%
  • College graduate – 36%
  • Trade/technical/vocational training – 6%
  • Some post-graduate work – 3%
  • Post-graduate degree – 24%
  • Other – 1%

Military Status:

  • Active duty – 1%
  • Veteran – 10%
  • Reserve – 1%
  • National Guard – 1%
  • No military experience – 88%

Ethnicity:

  • White/Caucasian – 65%
  • Hispanic/Latino – 7%
  • Black/African American – 7%
  • Asian/Pacific Islander – 14%
  • Other – 7%

Political Affiliation:

  • Democratic – 17%
  • Republic – 29%
  • Independent – 20%
  • Libertarian – 4%
  • Green – 0%
  • Undecided – 30%

United States Citizenship Status:

  • Natural born citizen – 70%
  • Naturalized citizen – 19%
  • Permanent resident – 7%
  • Visa holder – 2%
  • Applying for permanent status – 1%
  • Other – 1

Of those not of natural born citizenship, 64% percent are first-generation U.S. immigrants; 16% are second-generation. India was the most commonly selected country or origin by a wide margin.

Percentage of Business Buyers whose Parents and/or Grandparents Owned a Business:

  • Parents owned a business – 27%
  • Grandparents owned a business – 8%
  • Parents and grandparents owned a business – 15%
  • Neither parents or grandparents owned a business – 51%

Marital Status:

  • Single, never married – 14%
  • Married/domestic partnership – 72%
  • Widowed – 1%
  • Divorced – 12%
  • Separated – 1%

Children Under the Age of 18 Living in Household:

  • None – 54%
  • One – 17%
  • Two – 18%
  • Three – 7%
  • Four – 3%
  • More than Four – 1%

Household Income:

  • Less than $50,000 – 19%
  • $50,000 to $74,999 – 19%
  • $75,000 to $99,999 – 16%
  • $100,000 to $149,999 – 21%
  • $150,000 to $199,999 – 11%
  • $200,000 to $249,999 – 6%
  • $250,000 to $350,000 – 5%
  • More than $350,000 – 3%

When Buyers Plan to Begin the Process of Purchasing a Business:

  • Less than 3 months – 21%
  • 3 to 6 months – 18%
  • 6 to 12 months – 19%
  • 1 to 2 years – 13%
  • 3 to 5 years – 3%
  • Currently looking – 26%

Most Challenging Part of Purchasing a Business:

  • Finding the right business – 58%
  • Coming up with the down payment – 12%
  • Getting approved for financing – 10%
  • Negotiating the price with the previous owner – 2%
  • Understanding how much the business should be valued at – 13%
  • Other – 5%

About the Author

Contact:

Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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