There’s no denying that topics of a recession and rising inflation are glued to news stories across the country. These are unsettling realities for small business owners and buyers, but economists have described 2023 as a strong year for small business acquisitions in the US.
While this year will face some turbulence due to increased interest rates and inflation, a report by Edward Jones states that 2023 is expected to steer in a more positive direction.
Key points:
- A mild recession is projected for 2023
- Inflation is expected to decrease to 3% by the end of the year
- Niche businesses are growing exponentially, with stable profits
- Small businesses need to utilize technology to grow and overcome challenges
- SBA financing is practical for acquisitions with stable earnings and accurate valuations
Is it a good time for small business acquisitions?
The short answer is yes, but some industries will need to heed caution. Edward and Jones’s report explains that a recession may creep up in the first half of the year, but this will be mild compared to 2008, 1981, and 1974 economic downturns.
Likewise, 2022 proved the labor market’s resilience and strength, which economists predict will be the case for this year. While unemployment is rising, the report predicts that it will stay below 5%.
Another positive insight is that core inflation is expected to decrease steadily to 3% by the end of 2023, although businesses in the food and energy sector will remain volatile. A report by Pacific Business Sales indicates that retail and consumer goods will also be impacted by this mild recession. Consequently, the retail and consumer service sector will be at risk.
However, manufacturing and B2B sectors are expected to experience humble growth. Pacific Business Sales also indicates that niche businesses are enjoying stable profits and exponential growth.
We propose that this is partly attributed to niche businesses adopting multiple technologies that improve operational efficiencies. The U.S Chamber of Commerce states that small businesses who are adopting a broad range of technologies are expecting an acceleration in their growth.
Why technology is critical for business growth in difficult market conditions
It is fair to propose that business owners who strategically adopt a broad range of technologies can expect stable growth and combat challenges on the horizon.
A report by the U.S Chamber of Commerce indicates that 86% of small business owners believe they survived the COVID-19 pandemic because of technology adoption, and 87% believe that technology has helped them overcome and grow in challenging market conditions.
While economists expect this to be a mild recession, it will still be a bumpy journey. We encourage small business owners to consider investing in technology to maximize their sale value, and aid buyers in sustaining and growing the business amidst difficult economic conditions.
Should buyers consider SBA financing?
Acquisition finance is a common concern for buyers and rising SBA interest rates are an obvious deterrent. However, more context is needed to understand the viability of SBA lending for buyers with specific income requirements.
SBA financing can be suitable for business-sale acquisitions with stable earnings and an accurate valuation. Likewise, although SBA interest rates have risen, they are in line with historic rates. Pacific Business Sales explains that this increase is fundamentally a return to what was normal 3 to 5 years ago.
SBA lending is still a safe option for business buyers in 2023, but we encourage you to understand more about the qualifications and terms when applying for these loans.
2023: a bumpy road with a soft landing
Based on these insights, 2023 will be a good year for small business acquisitions with a grounded and healthy financial performance. Although an economic downturn is projected for 2023, several major investment firms predict a “soft landing” and growth in GDP.
If you’re a buyer looking for a business in a recession-proof sector, you can browse different business categories on our site. You can also use our advanced search capabilities to refine your search and find a business that matches your financial requirements.
If you’re a small business owner looking to sell their business, you can advertise your business for sale and find the right buyer on BusinessesForSale.com.
We hope this article has been insightful, and we encourage you to contact us if you have any questions or concerns.