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The Market Reality Check
If you're thinking about buying or selling a business in 2025, here's the straight truth: the market has shifted, but it hasn't stopped. We're seeing a more deliberate, buyer-favorable environment where deals still get done—they just take longer and require smarter positioning.
The numbers tell the story. In Q2 2025, we saw 2,342 businesses sold through major platforms (down 4% from last year), with a median sale price of $352,000 (down 6%). More telling? The average time on market increased by 12 days. This isn't a market crash—it's a market recalibration.
For sellers: Your business will sell, but probably not at 2021 pricing and not in 60 days. Quality still commands premium pricing, but buyers are pickier about what "quality" means.
For buyers: You have more leverage than you've had in years, more time to conduct thorough due diligence, and sellers who are increasingly realistic about pricing.
Valuation Reality: Where Multiples Stand Today
Let's cut through the speculation with hard data. For Main Street businesses (under $2M in seller's discretionary earnings), multiples are holding steady at 2.8x to 3.0x SDE. For larger small businesses ($2M-$5M in transaction value), we're seeing EBITDA multiples around 4.2x, with the $5M-$10M range trading closer to 4.4x.
Here's what's driving these numbers:
Interest rates matter: Over half of business owners believe higher rates have depressed valuations, though the Fed's recent cut to 4.00%-4.25% signals relief ahead
Sector performance varies dramatically: Retail businesses saw median sale prices jump 13% in Q2, while manufacturing deals dropped 28% due to tariff uncertainty
Quality premiums are real: Well-run businesses with recurring revenue, clean financials, and minimal owner dependency are still commanding top-of-range pricing
The New Financing Landscape: SBA Rule Changes You Must Know
This is where things get interesting—and where many deals are getting structured differently than they were just six months ago.
The SBA implemented significant changes in June 2025 that affect how acquisition financing works:
Seller notes are now capped at 50% of the buyer's required equity injection
Full standby is mandatory for the entire life of the SBA loan
Minimum 10% buyer equity requirements are being strictly enforced
What this means practically: Buyers need more real cash upfront, and seller financing has become more restrictive. In Q2 2025, 62% of buyers still planned to use SBA financing, but only 23% of sellers were willing to offer seller financing—creating a gap that smart brokers are bridging with creative structures.
The solution? Earnouts are becoming the new seller financing. Roughly 22% of all 2024 deals included earnouts, with smaller deals often featuring even higher percentages. The median earnout period is 24 months, typically tied to revenue metrics rather than EBITDA (which is easier to manipulate in small companies).
Industry Spotlight: Winners and Losers
Not all sectors are performing equally. Here's where the action is:
The Winners
Retail: Transactions up 2%, median sale prices up 13%, cash flows up 14%. The key? Established, profitable operations with defensible customer bases
Services: Deal count up 7%, though median prices dipped 5%. Buyers are active but price-sensitive—recurring revenue and low customer concentration drive premiums
The Challenged
Manufacturing: Hit hard by tariff uncertainty, with transactions down 28% and cash flows down 19%. Supply chain resilience and pricing power are becoming critical due diligence points
Restaurants: Deal volume down 16% as labor and COGS inflation squeeze margins. Revenue is up 6%, but cash flow is down 8%—buyers are demanding deeper discounts or earnout protection
Buyer Behavior: Who's Buying and Why
The buyer landscape remains diverse but predictable by deal size:
Under $2M: First-time buyers dominate (40-55% depending on size), primarily "buying a job"
$2M-$5M: Mix of serial entrepreneurs and strategic add-ons
$5M and up: Strategic buyers (23%) and private equity (59%) take over
For sellers in the sweet spot ($1M-$5M): Your most likely buyer is either someone looking to escape corporate life or an existing business owner seeking to expand. Both buyer types are sophisticated and will conduct thorough due diligence.
The Due Diligence Evolution
Here's something every seller needs to understand: due diligence periods have gotten longer and more intensive. What used to be a 60-90 day process is now routinely stretching to 4-6 months from letter of intent to closing.
Buyers are scrutinizing:
Customer concentration and retention rates
Add-back legitimacy (goodbye, country club memberships)
Working capital requirements and seasonal variations
Tariff exposure for any manufacturing or import-dependent businesses
Labor cost trends and key person dependencies
Pro tip for sellers: Commission a sell-side quality of earnings study before going to market. It shortens due diligence, reduces surprises, and often pays for itself in higher valuations and faster closings.
What's Coming: The 2025-2026 Outlook
Several positive trends are converging that should improve market conditions:
Rate relief: The Fed's September cut signals more flexibility ahead, which should gradually improve buyer financing costs
Improving sentiment: The NFIB Small Business Optimism Index hit 100.8 in August—above its long-term average for the first time in months
Pent-up supply: Many baby boomer business owners delayed retirement during COVID uncertainty; that wave is starting to hit the market
The opportunity: Quality businesses should see multiple buyer interest as conditions improve, while buyers who move decisively in today's environment can still find good deals before competition intensifies.
Action Items: What to Do Right Now
If You're Selling:
Price realistically using current market multiples, not 2021 comparables
Prepare financials thoroughly with clean add-backs and working capital analysis
Consider earnout structures if there's a valuation gap you can't bridge with price
Highlight recession-resistant attributes like recurring revenue, contracted customers, or essential services
If You're Buying:
Get financing pre-qualified under the new SBA rules—model your equity requirements carefully
Focus on cash flow sustainability rather than revenue growth stories
Negotiate earnouts strategically with clear, auditable metrics and reasonable time horizons
Target resilient sectors but don't overpay for perceived safety
For Both Parties:
Plan for longer timelines from initial discussions to closing
Work with experienced advisors who understand current market conditions and financing requirements
Consider asset vs. stock structures based on tax implications and liability concerns
The Bottom Line
The small business M&A market in 2025 rewards preparation, patience, and realistic expectations. Deals are getting done every day, but they're more complex than they were a few years ago. The companies that understand current market dynamics—and position themselves accordingly—will be the ones that successfully navigate this environment.
Whether you're buying your first business or selling the company you've built over decades, success comes down to understanding what today's market demands and adapting your strategy accordingly.
This analysis is based on current market data from the International Business Brokers Association, BizBuySell, SBA policy updates, and leading industry research. Market conditions change rapidly—always consult with qualified advisors for your specific situation.
Ready to explore your options? Contact us to discuss how these market trends affect your specific buying or selling timeline, and let's develop a strategy that positions you for success in today's market. [email protected]
Brett Vogeler is a business broker, real estate broker, and entrepreneur with decades of experience helping clients navigate complex transactions. His insights combine real-world deal experience with current market intelligence to help buyers and sellers make informed decisions.
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Need a roadmap? Reply in the comments section or send us an email for assistance. 360 Perspective Partners offers Professional Licensed Business, Commercial and Investment Brokerage Services along with providing Professional Licensed Community Management Services in Central Florida: https://my360perspective.com/
Contact me directly at [email protected]. To see our other useful Newsletters on this topic and others: https://realestate-business-broker-guru.beehiiv.com/
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