Small-business sales cratering

2009 also marked a shift in the way businesses got sold. In the absence of bank lending, sellers became the bankers — helping finance the sales of their businesses.

“It was a really tough year to sell a business in the Atlanta area,” said BizBuySell General Manager Mike Handelsman.

According to an analysis of 109 closed transactions in metro Atlanta by BizBuySell, businesses sold for a median price of $121,000 in 2009. That’s down from a median sale price of $146,250 a year earlier.

Area businesses that sold last year had median revenue of $275,000 and median cash flow, money that comes out of the business over the course of a year, of $78,940.

A lack of confidence in the economy made people more reluctant to buy businesses last year, Handelsman said.

“If they did buy,” he said, “they were much less willing to pay the prices that they paid before.”

The health of small businesses, those with fewer than 500 employees, is indicative of the economy’s overall health. While Fortune 500 companies get the headlines, small businesses fuel the nation’s economy, creating more than two-thirds of all new jobs.

Asphyxiating demand

Last year was perhaps the most difficult year Chet Walden has seen in 21 years of business.

“We probably lost 25 percent of the deals we worked on because of a lack of financing,” said the president of Walden Businesses Inc., an Atlanta business broker. “Banks are requiring a lot more assets and net worth than they were in 2008.”

The volume of small-business sales in 2009 dropped about 20 percent at Walden. Profitability of the for-sale companies, meanwhile, was down 15 percent versus the prior year.

“If we had not been able to be creative in financing and structuring transactions,” Walden said, “we wouldn’t have been able to get these [deals] done.”

Andrea Peterson has had her Clayton County restaurant on the market for 90 days.

“We are optimistic we’ll get it sold, hopefully within the next 30 to 60 days,” Peterson said.

That optimism is driven by the fact that Peterson has priced the business aggressively — she has cut her asking price by $15,000.

“It’s not priced where many people would need financing,” she said.

It took William “Bill” St.Clair a year and a half, and a 15 percent price cut to off-load his commercial janitorial service.

“The biggest challenge then, and I think still continues, is that it’s very difficult to get lenders to lend money to people buying small businesses,” St.Clair said. “Not at [just a high] rate, but at all.”

St.Clair said his Gainesville-based ServiceMaster franchise got sold in large part because ServiceMaster agreed to make a “significant loan” to the buyer.