As President Trump continues to increase tariffs against China, the 2018 Buyer-Seller Confidence Index from BizBuySell has revealed 3 out of 4 small business owners support the President’s agenda.
The data regarding tariffs highlights the support the President has with this particular issue. Even though 30% said the tariffs would negatively affect their business, more than half of these respondents said they back Trump’s initiatives.
As one of the business owners put it, “I import 90 percent of my inventory so tariffs will hurt my business but are necessary to the American economy.”
The confidence small business owners have is driven by a strong economy, low unemployment and an increased sense of optimism in index after index. This optimism is also driving up the price of available business inventory.
In the press release, Bob House, President of BizBuySell.com and BizQuest.com, explained there are different factors driving up the price. House said one of the reasons is business owners who are looking to retire.
“The owners, many of them Baby Boomers looking to retire, will receive more for their business, but the buyers are also receiving more financially-healthy, profitable businesses than they were a few years ago. This is a big reason why there have been so many transactions taking place this year and we expect that to continue into 2019.”
BizBuySell uses its expertise in the business for sale marketplace to generate the data for the confidence index with a survey. The company currently has an inventory of around 45,000 businesses in 80 countries around the world.
The survey is carried out with the participation of more than 2,000 entrepreneurs interested in either buying or selling a small business. A score from 0 to 100 is used to measure the confidence level small business owners have for the current sale environment. Higher is better, and 50 represents even confidence.
BizBuySell 2018 Buyer-Seller Confidence Index
The 2018 Buyer Index is up by one point from 2017’s 46 to 47, while the Seller Index has stayed the same at 58.
The company says buyers are more confident they will find quality listings in the market, and owners are optimistic they will get a reasonable price if they sell.
Sixty percent of owners said they are confident they will get the price they expect if they were to sell their business today.
As to the available inventory, BizBuySell reports the number of open listings has increased 6.7% from the previous year. And the businesses that are up for sale have increased their revenue and cash flow, which is responsible for a higher median asking price.
Even with the higher median asking price, transactions are not slowing down and buyers are continuing to enter the market. According to BizBuySell, the data suggests buyers are willing to pay more if the business has strong fundamentals.
Tariffs
The support for the tariffs is high, with 3 in 4 business owners saying as much. Sixty percent say they would not be impacted by the tariffs while 30% said the tariffs would have a negative impact. The remaining 10% stated they would benefit from the new tariffs.
The support for the tariff doesn’t extend to business buyers who are looking to buy or take over a business. Only 30% said they are willing to take over a business while 23% said they are less likely to invest in a small business.
When owners were asked how they would cover the increased costs associated with the tariffs, 34% said by proportionally increasing prices. Others said they would cover the cost by taking the bottom line hit, cutting spending, reducing headcount, and cutting wages at 13, 12, 4, and 1 percent respectively.
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