What is the Market for Selling Your Business in 2023?

This past year was a more difficult environment to sell your small business with valuations on public companies down with the fall of the stock market.

For 2022, valuations were especially down in technology based small businesses from 2 to 5 times sales. This is very different than 2021 where I saw companies in the technology space sell for 7 to 12 times sales. This last year, we also so companies increasing selling for stock and cash (as opposed to just cash).

Higher valuations are going to companies that are profitable and growing. If you have to sacrifice growth for profitability, do it. I anticipate for 2023 the market for selling a small business to be similar.

Main street service businesses continue to sell for 3 to 4 times cash flow. These are almost always sold for cash and many times the source of the buyer’s financing is either the SBA or the seller.

With valuations down, is 2023 the time to sell my small business? The answer as always is that it depends as an owner on your situation.

Sell your business if you have had a strong 2022 in terms of profit and growth and you see 2023 in similar terms and want to test market valuations. Alternately, you should also sell your business is you are just done running it, have to get out to do something else and have a “soft landing”.

Do not sell your business if business is going well and you have cash flow to sustain you for another few years. This way, you can hold on for higher multiples at a higher sales rate.

I was able to sell 3 businesses last year with offers on others (that the owner eventually turned down). Let me know if I can help you make a decision about your small business.