Survey Shows Buyers Were Willing and Able in ’97

Buyers nationwide were more eager to purchase small businesses last year, paying higher prices and higher down payments than they did the year before, according to a survey by a Southland business brokerage firm.

In return, buyers picked up businesses that enjoyed higher gross sales in 1997 than in 1996, according to the report by Newport Beach-based VR Business Brokers. Both independent economists and principals of the company attributed the trend largely to a healthier U.S. economy.

“Buyers are feeling good about what the future holds for the economy, and they’re more willing to pull the trigger,” said VR President Cathy Vallevieni.

Buyers paid an average of $141,000 last year to acquire small businesses, an 8% increase over 1996, the report found. Buyers also were willing to put more money down for their purchases, an average of 62% of the sales price in 1997 compared with 54% the previous year. In exchange, buyers received better sales prices, paying a lower average ratio of a business’ annual cash flow last year (1.8) than in ’96 (2.0).

The findings came from a sampling of 600 sales brokered by VR from its 50 offices nationwide. The businesses ranged from manufacturing plants to dry cleaners and had gross annual sales up to $5 million.

William Dennis, an economist with the National Federation of Independent Businesses in Washington, sees the buying trend as more than just a function of a better economy. He said it also reflects an increasingly popular view of the small-business sector as a vital entrepreneurial laboratory, closer in touch with public likes and dislikes than large corporations.

“Small businesses are a very important source of new ideas and new innovation,” Dennis said.