Small Business Acquisitions Rise 5% in 2024, Driven by Higher-Priced Deals

Small business transactions in the U.S. increased by 5% in 2024, with 9,546 closed deals representing an enterprise value of $7.59 billion, 15% higher than in 2023, according to BizBuySell’s Insight Report. Despite three Federal Reserve rate cuts, the impact on the business-for-sale market remained limited, with 60% of surveyed buyers reporting no effect on their purchasing timeline.

Higher-Priced Deals Drive Market Growth

Business sales grew steadily throughout the year, with 10% growth in Q1, followed by 5% in Q2 and Q3, before leveling off in Q4. The median sale price increased 3% year-over-year to $345,000, while the average cash flow multiple rose from 2.49 to 2.57. Transactions also moved faster, with median days on the market dropping to 168 days.

“Despite the Federal Reserve’s rate cuts, many commercial lenders have kept underwriting criteria tight, resulting in minimal pass-through savings for acquisition financing,” said BJ Delhamer, vice president at Insite Commercial Real Estate Advisors.

With post-election uncertainty fading, buyers are expected to accelerate purchases. Carrie Duvall, CEO at 1st & Main Partners, reported a strong start to 2025, closing multiple deals exceeding her best annual earnings.

Manufacturing, Technology, and Construction Sectors Surge

Key industries drove transaction volume in 2024, with manufacturing, building and construction, and online and technology businesses seeing a combined 32% year-over-year increase in sales.

• Manufacturing: 15% increase in acquisitions; median sale price $700,000; cash flow multiples up 9.5% despite weaker margins.
• Online and Technology: 74% surge in transactions; median sale price $650,000, 24% lower than 2023, reflecting more lower-priced deals.
• Building and Construction: 10% growth in acquisitions; median sale price $760,000; stable valuations with small gains in cash flow.

AI and cloud-based platforms have made technology businesses more scalable, while reshoring efforts continue to boost U.S. manufacturing appeal.

Tariff Concerns Loom for Small Businesses

The return of Trump administration tariffs raises concerns about rising costs. 48% of business owners are bracing for increased expenses, while 15% are seeking domestic suppliers to mitigate risks.

One in five business owners surveyed said they would pass tariff-related costs onto consumers, potentially fueling inflationary pressures.

Inflation and Rising Costs Challenge Small Businesses

Despite easing inflation, 54% of business owners say costs remain high, with 78% reporting increased expenses in 2024. Key cost drivers included higher goods costs (70%), insurance (51%), and payroll (44%).

Financial performance remained flat, with median revenue fluctuating throughout the year and cash flow following similar trends. The median sale price of small businesses rose just 3%, reflecting ongoing financial pressures.

More Sellers Enter the Market Despite Financial Uncertainty

Sellers continued to offload businesses despite weaker financials, with 38% of brokers saying the market favors buyers. Retirement remains the top reason for selling (38%), followed by pursuing other opportunities (35%) and cashing in on high business values (21%).

“We are tired. It’s incredibly difficult to find good employees that will help us provide the high level of customer service that we are known for. We have managed to show significant growth year-over-year since 2019 and along with solid investments we are in a position to retire very early,” said Levi Fehrs, owner of Kodiak Furniture in Alaska.

New Buyers Emerging: Corporate Refugees and Young Entrepreneurs

The rise of corporate refugees—professionals leaving corporate jobs to own businesses—has fueled demand. 42% of buyers identified as former corporate employees, while 14% were recently unemployed. Young MBAs are also entering the market, driven by Entrepreneurship Through Acquisition (ETA) programs at major business schools.

Service, Retail, and Restaurants Hold Steady; Private Equity Grows

• Service businesses: 40% of transactions, median sale price $325,000, slight growth.
• Retail: Flat transaction volume, median sale price $255,000, steady demand for specialty businesses.
• Restaurants: Flat sales volume, median sale price $225,000, 4% drop in revenue offset by higher profit margins.
• Private equity firms: Increasing interest, particularly in niche industries with strong cash flow.

Market Outlook for 2025

With financing constraints persisting, seller financing is expected to play a larger role, with 91% of brokers citing it as critical. Interest rates remain a top concern, and 23% of brokers rank them as the biggest market challenge.

“With tighter lending conditions, both buyers and sellers should be prepared to negotiate creative financing options, such as seller notes, earn-outs, or partial equity retainment. These structures can help bridge valuation gaps and signal confidence in the business’s future performance,” said Delhamer.

As AI, reshoring, and entrepreneurship drive business acquisitions, buyers are focusing on stable, recession-resistant businesses (76%), while 42% analyze financial performance as their top priority. Despite challenges, demand remains steady, and savvy entrepreneurs continue to find value in the market.

This article, "Small Business Acquisitions Rise 5% in 2024, Driven by Higher-Priced Deals" was first published on Small Business Trends