An Amateur's Market Analysis: Businesses for Sale as of October 2023

Background: Conducting a self-funded, regional search while employed, I developed a web scraper tool to systematically retrieve and review all BizBuySell listings, aiming to save time on preliminary analysis of each business. I then expanded the tool to scrape all businesses listings in the USA. Although CoStar Group does do an excellent job publishing their quarterly market research and interactive data reporting they don't delve into the details from the perspective of a self funded searcher. The subsequent analysis was organized by bifurcating the data based on Asking Price Group and Cash Flow Group, offering a clear depiction of market trends across distinct market segments. This includes an analysis of businesses in each price point from “Micro businesses” to “Traditional M&A Targets”.

Disclaimer: The total count of businesses listed for sale as presented in this analysis may be influenced by limitations inherent to the web scraping script utilized or limitations on the BizBuySell platform. The consistency in the total count of businesses across the four-month period from June to October###-###-#### ,002 and 9,004, respectively) is unlikely to be accurate and might be reflective of these limitations. Full disclosure, I am not a data scientist or statistician, just a lowly Big4 consultant that is bored during endless Zoom calls. Despite this, the data extracted is a representative sample of the marketplace and provides valuable insights into market trends and dynamics.

This research report is being posted anonymously due to the potential breach of Terms of Service associated with web scraping on the BizBuySell platform, and the necessity to maintain anonymity given my utilization of other tools provided by CoStar Group.

Definitions: Micro Businesses ($0 to $499,000): Small-scale businesses typically owned and operated by individuals or families, often with fewer than five employees.

Main Street Businesses ($500,000 to $1,999,999): Larger than micro businesses but still on a small scale, often having a local or community-based focus with a moderate number of employees.
Small Businesses ($2,000,000 to $4,999,999): Businesses with a substantial operational size often encompassing a broader market reach than main street businesses, potentially across multiple localities.
Medium Businesses ($5,000,000 to $9,999,999): Mid-sized businesses with a significant market presence, often operating across several regions.

Traditional M&A Targeted Businesses ($10,000,000 and above): Large-scale businesses typically targeted in mergers and acquisitions due to their substantial market share, operational size, and strategic value.

Introduction: The market analysis delineates the landscape of businesses listed for sale on BizBuySell as of October 2023, providing a vital resource for potential searchers to decipher market dynamics. The data was sourced through a custom-built web scraper, garnering information on business name, location, asking price, revenue, cash flow or seller's discretionary earnings (SDE), franchise status, net margin, employee count and valuation multiple.

Key Findings by Asking Price Grouping: The data portrays a robust market for small to medium-sized businesses, with a total sample size of 9,004 businesses listed for sale as of Oct. 25th###-###-#### These businesses have been categorized into five distinct groups based on their asking prices:

Micro Businesses ($0 to $499,000): Comprises the largest segment with 5,552 listings (62%). Exhibits an average revenue of $622,###-###-#### and an average SDE of $160,327.79. The average valuation multiple is 2.28, suggesting a moderate rate of return for investors. Business at this level average 3.8 employees, and typically include the owner operator.

Main Street Businesses ($500,000 to $1,999,999): Main Street holds 2,574 listings (29%) with an average revenue of $1,459,###-###-#### and an average SDE of $341,781.37. The average valuation multiple is 3.59, indicating a relatively better perceived value or return compared to Micro Businesses. Main Street businesses average 7 employees.

Small Businesses ($2,000,000 to $4,999,999): Encompasses 633 listings (7%) with an average revenue of $2,976,###-###-#### and an average SDE of $746,145.65. With an average valuation multiple of 4.95, this segment indicates a good perceived value and a potentially higher rate of return. Business at this level average 10 employees.

Medium Businesses ($5,000,000 to $9,999,999): Constitutes 190 listings (2%), displaying an average revenue of $4,177,###-###-#### and an average SDE of $1,619,281.36. Business at this level average 13 employees. The highest average valuation multiple of 5.35 among all groups, suggesting the highest perceived value and potential return.

Traditional M&A Targeted Businesses ($10,000,000 and above): Includes 55 listings (1%) with an average revenue of $3,690,###-###-#### and an average SDE of $3,163,871.80. The valuation multiple averages at 4.92, slightly below that of Medium Businesses, possibly reflecting a higher perceived risk or other market factors. Business at this level average 18 employees.
At this level it's difficult to take the data at face value as many of these listings do not include all necessary information (e.g. asking price, revenue and cash flow) and are typically blank or listed as “call for details”.

A note on franchises: As franchise companies are of no interest to me personally, I created this filter in my script to sort them out of my potential search targets. With that said, franchised businesses constitute 27.63% of the listings whereas non-franchised businesses make up 72.37%, indicating a market trend favoring independently owned businesses.

Comparative Market Analysis June 2023 vs October 2023 I've only conducted this nationwide analysis once before in June###-###-#### Most of my findings from this summer align with the October analysis. However, there are some notable deviations as detailed below.
Key Observations: 1. There is a noticeable increase in the average revenue and Seller's Discretionary Earnings (SDE) across all segments from June to October###-###-#### For instance, the average revenue for Micro Businesses increased from $369,###-###-#### in June to $622,###-###-#### in October, and the average SDE increased from $72,###-###-#### to $160,###-###-#### during the same period.

2. Valuation multiples across most segments have increased from June to October. For example, the valuation multiple for Micro Businesses increased from 1.97 to 2.28, indicating a better perceived value or potential return for these businesses in October.

3. Each price segment showed a consistent trend of increased average revenue, SDE, and valuation multiples from June to October.

• - Brian Anonymous