For those in the market to buy a business, the best opportunities are snapped up quickly, and many businesses for sale languish.
That’s the insight of Don Imbus, a Tampa-based agent at American Business Brokers, a firm based in Fort Myers with a Tampa Bay focus.
Imbus shared median Business Brokers of Florida data for 2022 and 2023. That means many businesses in the data are very small (one or two employees), but a few are much larger and sell in the $20 million to $30 million range.
Deal volume dropped in 2023, possibly attributable to for-sale businesses with many red flags, trending poorly and un profitable, or having difficulty acquiring financing.
“Transactions are down, and there’s always a lot of complaints from buyers about what they call trash on the market — businesses that aren’t worth buying,” he said. “Finding a good business to buy was always challenging, and it’s becoming increasingly so.”
Tampa Bay business sale activity
From 2022 to May 2, 2024:
On paper, the economy seems strong, but for a small business owner, challenges abound around higher labor costs, Florida’s increases in its minimum wage, and the cost of fuel and other raw materials and inputs have gone up.
“There’s a lot of desperation out there right now with business owners, and it can be easier to fi nd listings, but they aren’t necessarily of great quality,” he said. “They can’t necessarily increase pricing to compensate for that because consumers face inflation challenges.”
That is putting business owners in a real pinch, especially restaurant owners. Restaurants are always the No. 1 category but it’s tough to make them profitable, Imbus said.
“There’s a lot of them opening, but there’s a lot of them closing or selling.”
Strong businesses go under contract quickly. Weaker performers, not so much.
“They could languish for a year or a year and a half. Maybe they never sell,” he said.
Small business value misperceptions
Small business owners often ask Imbus what he thinks their business is worth. They often share with him that they believe it’s worth three to five times their revenue.
“I go, ‘Oh no, no, it might be three times your profitability and certainly not times your revenue, but it might even be lower than that,'” he said. “Reality sets in, and they say, ‘Oh, I didn’t realize that it was worth so little.'” Buyers are buying cash flow, and the value will be some multiple on profitability, he said.
