2021 Small Business Outlook: Is Florida the Canary in the Coal Mine?

According to the latest BizBuySell Insights report, small business sales activity was strong as buyers continue to flock to high performing businesses causing median sale prices to jump 30% compared to Q1 of 2020, according to BizBuySell’s Insight Report. “Essential businesses” including liquor stores, convenience stores, gas stations, construction services and home improvement businesses, e-commerce sites, medical businesses, manufacturers, and distributors were most in demand. Highlights below in summary.

  • Sold businesses reported 15% YOY increase in median revenue as stronger businesses drive transactions
  • Sale prices boomed 30% amid rising multiples fueled by record demand
  • Survey data hints demand may soon shift to more affordable acquisitions

Let’s take a closer look at the Tampa MSA. The Average Median Sale Price was $810,500 vs $325,000 nationally in Q1. Moreover, the Average Revenue Multiple was 1.03 vs .65 nationally and the cash flow multiple was 3.26 vs 2.53 nationally. Average days on market in Tampa was 77 versus 190 days nationally in Q1 2021. Florida was one of the first states to relax pandemic policies and its strong economic positioning for small business owners seems to suggest that as other cities and states return to normal in 2021, we’ll see demand for quality listings improve. 

Q1 was a very strong quarter for Thornberg as buy side clients were actively pursuing good cash flow businesses that were COVID beneficiaries in 2020. In short, there are more buyers than sellers currently and as more businesses come to market, the premium buyers are currently willing to pay will normalize. Buyers are benefitting from low interest rates, SBA 7(a) incentives and the fear that proposed capital gains tax rate increases will pass in next years’ Congress.

Sellers are telling us they are “late to market” due to the extension of 2020 tax filing and the impact of COVID on their business. However, as time passes, we believe the second half of 2021 will see more quality listings as labor shortages improve, inventory supply improves and commodity prices stabilize at a lower level. 

Overall, we believe 2021 will prove to be one of, if not the best years to bring your business to market. Now is the time to act; on average it takes nine months to sell a business, but as you can see in Tampa, the average time was 77 days on market. If you’re even thinking about selling or buying a business, please click on my calendar link below to schedule some time to talk or give me a call at 502-510-2403.