Los Angeles Business Journal

Market for Small Business Sales Softens

By Alfred Lee Monday, July 16, 2012

The market for small business sales in the Los Angeles area softened in the second quarter in yet another indicator of a weakening economy, according to data from website BizBuySell.com.

The median asking prices for businesses in Los Angeles and Orange counties listed on the website was $210,000 in the second quarter, down 8.7 percent from a year earlier.

“That would suggest to me that in the greater L.A. economy, small businesses are still struggling,” said Mike Handelsman, group general manager at BizBuySell, based in San Francisco. “Owners are lowering their prices in order to try to create opportunities for sales.”

Median revenue and cash flows also dropped, respectively, by 2.5 percent to $390,000 and by 4.3 percent to about $92,000. Total listings dropped 11.9 percent to around 2,200.

The year-to-year changes were worse in Los Angeles than nationally, where median asking prices dropped only 1 percent to $236,750 while median revenues and cash flows rose.

BizBuySell recorded a higher number of closed transactions in the Los Angeles area for the quarter. Handelsman said the sample size was too small to indicate a larger trend, but said one driver could be uncertainty surrounding the future of the capital gains tax, set to expire at the end of this year.

“People are generally expecting an increase from 15 percent to 20 percent,” he said. “Owners may want to exit their business this year so they can pay a lower tax rate.”