Laundromats, Private Equity, and Seller Financing: Inside Today’s Business Sales Market

Bob House (00:00)

I mean, it's much easier to start an existing or to buy an existing business as customers trained employees, licenses and permits, a customer base that is, you know, knows you than to start something from scratch. It's hard to get people to go somewhere new versus go to what they're familiar with. So there's always great opportunities to take something and build on it. Some of the biggest success stories in American capitalism are stories like that McDonald's and Starbucks and many others.

Announcer (00:30)

Welcome to THRIVE, a Paychex Business Podcast, your blueprint for navigating everything from people to policies to profits. And now your host, Gene Marks.

Gene Marks (00:41)

Hey everybody, it's Gene Marks. And welcome back to another episode of the Paychex THRIVE Podcast. I have with me today Bob House, who is the president of BizBuySell. Now, if you guys have never been to BizBuySell, I have been a fan of this site for years. I go to this site regularly when I speak to business groups and I do things on succession planning. I always plagiarize data from BizBuySell. I give you guys credit, Bob, don't worry. But I use some of the charts that you guys have and just the overall, it's just a wonderful site without me just gushing over it, first of all, Bob, first of all, explain to us what the site is, what the platform is and what you guys do, please. And thank you for joining.

Bob House (01:28)

Sure. Yeah. BizBuySell is the leading marketplace where, you know, small business owners and the entrepreneurs who are ready to take on their these businesses as the next leaders and owners of them meet online to conduct deals. And so, we have the largest inventory of active small businesses being marketed in the country and the largest audience of business buyers, over 4 million visits to our network of sites every month, looking at these listings, contacting these owners, and making deals happen.

Gene Marks (02:00)

That is great. How'd you get into this business?

Bob House (02:04)

I've always been kind of in small business in one way, shape, or form. And I've been here for 14 years, but before that I worked for another small business-oriented website, again serving entrepreneurs looking to start, buy, grow, you know, businesses.

Gene Marks (02:21)

Got it. And how do you make your money? I mean, it's not advertising really, is it? You get like a commission on sales?

Bob House (02:28)

No, no, we're not, yeah, no, it is advertising. So, we're a marketplace, you know, we have very strong SEO and we do a lot of marketing to drive a large audience to our platform. It's a, it's an advertising supported model. So, owners, brokers, franchisers, all pay to list opportunities that they want to market on our platform, and buyers can come and search those opportunities for free. We do have a premium service for buyers when they want additional insights data and to better, you know, navigate the deals that are on the platform. But most of it is advertising supported revenue.

Gene Marks (03:04)

Got it. So how does this work? Like say I want a, first of all, I have a 10-person company outside of Philadelphia. My company is worth absolutely nothing, Bob. I think I have to pay somebody to take it off my hands. We're like a service business with no assets to speak of and basically just cash and receivables. But anyway, you know, that's my headache, not yours. But like say I did want to sell my company, and somebody was insane enough to be interested in buying my company. How, how would I use your site to do that?

Bob House (03:35)

Well, you would, you know, you could come to our site and first of all, you access all of our tools and content we have around how to navigate this process. So there's a lot of information there about how you prepare for an exit, how you, you know, it's a journey that starts long before you're ready to sell. You really should prepare at least three years in advance of an exit. And, but we have all the content and tools to help you value your business. We have a large resource and directory of professional advisors who can help you navigate that transition and that you could contact and hire on the platform. Those are like business brokers and intermediaries who are our customers and they'll guide you through the process. And, yeah, so you know that it starts with preparing your business for the exit, and getting evaluation, and then assembling a team that's going to help you kind of navigate that transition.

Gene Marks (04:29)

So, if it's me looking to sell as a business owner and I want to go and leverage the stuff on your site, I'm not paying anything for that, I've got all the resources there I can learn and then I can also connect myself to brokers. right? Correct me if I'm wrong there. What if I'm a broker? Like do I say that's my business, that I'm a broker? I'm not, but I'm saying I was, do we have to pay to be listed on your site, or is there, you know, how does that work?

Bob House (04:53)

That's right. Yeah. Business brokers are subscribers to our platform and in that subscription they're able to market their business opportunities as well as themselves and their services as well as get access to our data to help price the businesses and a slew of services that really help them grow their brokerage and their business and help owners on their journey to an exit.

Gene Marks (05:17)

Got it. Okay, good. So, every month you guys do, oh no actually it's every quarter, right? Correct? You do like a quarterly update on the marketplace and you base it based on your data. First of all, talk to me, I just read it and I have some questions. Give us a quick summary though of your most recent quarter, what you have found as far as activity in the buy-sell market.

Bob House (05:40)

Sure. Yeah. So we've been doing this now almost 20 years.

Gene Marks (05:44)

Crazy.

Bob House (05:44)

Every quarter we kind of report on trends and transactions in the industry. We take our submitted transactions by participating brokers on our platform and we wrapped that up with a survey of owners, buyers, brokers, and bring sentiment into the story. So anyway, yeah, the most recent quarter, you know, represented a period of a more selective market. There's certainly lots of deals still happening, but it was down 10% over the prior year, most recent quarter. We'll have a new report coming out in about three more weeks, so stay tuned for that. But yeah, it just represents value of higher, you know, higher selectivity around the businesses that were transacted and still strong demand and lots of buyers still looking for opportunities out there.

Gene Marks (06:42)

So strong demand. There are lots of buyers. There is, you know, and I'm assuming there's, you're expecting to be, you know, an increase supply. That's why I was surprised when I saw like the decrease in transactions. I mean, you know this as well as I do. Like for the past however many years, we're hearing of the Silver Tsunami and the aging, you know, the Boomers that are, you know, retiring or dying and, you know, businesses becoming up for sale. And yet I'm like, like I'm not seeing that yet. You know what I mean? And I know neither are you. And I'm curious, like, why do you think we're not seeing that sort of explosion that was predicted of these types of transactions? And second part of that question is, do you expect to see that or is it just coming?

Bob House (07:28)

Yeah, the Silver Tsunami has been commonly quoted. It's been more of a slow rolling wave than a surge. And it's probably because a lot of these owners have a hard time letting go of their businesses. Eventually that will happen. And it is happening. And we are seeing rising inventory. That doesn't mean that necessarily more deals are getting done. It's dependent on a lot of factors in the marketplace you know, financing has become a little tighter. SBA requirements for the 7a loans which most these deals are financed under have become more selective and more stringent. And at the same time there's businesses that are being pressed on their margins due to rising costs, labor costs, and fuel costs, or inventory costs related to perhaps tariffs or other things. So there has been some pressure on small business and that certainly increasing inventory. But that doesn't mean that those deals will all get done if they don't have a defendable profit profile.

Gene Marks (08:37)

Yeah, it's funny the environment that we're in right now, we're in a higher interest rate environment now. So, you know, getting financing is more expensive. So that obviously has to have an impact. Are you seeing more seller finance deals because of that or is it still traditional bank loans?

Bob House (08:54)

Well, there's a real disconnect between what buyers expect and what sellers are planning to offer. Yeah, 90% of buyers expect seller financing. They, they want that seller to participate and stand behind the business. And you know, the tip, the requirement by the SBA is 10% equity injection. Five percent of that can be seller note on full standby and buyers want that. But sellers are only about 20 to about 30% of them are say they're ready and willing to offer seller financing. I do think when the rubber meets the road, sellers do come to the table. And it's the difference between a deal getting done versus it languishing sometimes if they are able to offer that financing.

Gene Marks (09:41)

Got it. What kind of impact has private equity had on your life and on the market?

Bob House (09:49)

Yeah, it's interesting. It's, private equity has definitely moved down market and into some of the categories that, you know, historically they haven't played in on BizBuySell, you know, HVAC companies and other kind of recurring businesses that can be rolled up across geographies and you know, that have nice profit profiles. But it's still a small overall percentage of the buyer pool. But they're there and they're participating. You know, most of the buyers on our platform are still coming out of a job, a corporate refugee. About half of them are looking to build equity in something that they own. They've got nest egg and experience and are ready to, you know, to take control of building equity in their own business. So that's the most, the biggest buyer pool. But you know, there are others, you know, entrepreneur through acquisition is growing in popularity and search funds. So, you have a lot of, you know, newly minted MBAs who are looking to buy a business versus go and work for a consulting firm or a bank. That might have been a traditional career path for those graduates. So, yeah, those are the kind of some of the perspectives on buyers on BizBuySell.

Gene Marks (11:13)

That's good. We have been reading, I just, I'm curious for your perspective because you said that, you know, you survey your community, you get data from your community as far as transactions and you survey for sentiment. So, you know, I just came across a report on CNN, actually, just like yesterday, about how so many small businesses are struggling in 2026. And I, and Bob, I have to be like, straight out, like, I'm kind of seeing the opposite of that. Like, I'm not, I don't want to say, like there are definitely people struggling. We live in a big country with 34 million businesses. So, you know, it's very tough to generalize. But I speak to a lot of industry associations around the country and it's not as if they don't have challenges. Of course they do. And we all, you know, inflation and supply chain and finding labor and all that stuff. But honestly, for the most part, you know, the vast majority of people that I speak to and the industries that are covered are doing okay. You know, like they're doing okay. Now, I know you're not an economist by trade and it's not like you have data from 34 million businesses, but you've got your data. I'm kind of curious, what, how are you seeing the small business market? Do you hear from sellers of businesses that overall, generally things are bad, things are good? What is the sentiment that you're seeing?

Bob House (12:31)

I think entrepreneurs and small business owners are generally an optimistic, can-do kind of group of people. And so there's lots of wealth being generated and created in small business and lots of great success stories based on the survey data. Again, it's a sample, but when we survey our buyers that are registered users on our platform about, and owners, about what's the state of their businesses. They do say that they are feeling the pressure of higher costs. And you can also see that reflected in our data in that margins have gone down. You can just look at our median profitability compared to the median revenues. Median revenue has continued to go up, but the profitability is not kind of kept pace in terms of, you know, the SDE or the cash flow that the business throws off. So, yeah, you know, there's, there's a bit of everything in there. Small business is a huge thing in this country. There are categories that are killing it and categories that are being displaced by, you know, shifts in the competitive landscape of the marketplace. So, yeah, you know, you have to kind of take that with, you know, that perspective. But 76% of our owners say that expenses have increased. The cost of goods and materials 67%, fuel and energy 58%, labor, 38% site higher payroll costs. So these are, again, survey results. So.

Gene Marks (14:02)

Yeah, makes sense. That makes complete sense. And most people are, you know, they're navigating around that by cutting your bread, investing in technology, raising prices. You know, it's just, they are there. Yeah, I was talking to one client that's a trucking company and their diesel costs, you know, as we're recording this, you know, super high. You know, I'm like, wow, you know, he's like, now we just pass it on down to our customers. Customers need their products. So, you know, so some businesses are, it's easier to do that, you know, than others. How about like, so, you know, here we are near the last quarter of 2026. Hot industries, like any, are you seeing any specific industries themselves that are like, these guys are this is really active or there's some real?

Bob House (14:45)

Yeah, I mean, I think anything with, like, recurring, defendable kind of revenue is super hot. So, a lot of home services, healthcare, home care, recurring revenue businesses are definitely in high demand. You know, everybody wants to own a laundromat. Passive income. But, you know, it really depends. I mean, like, some categories, we have a lot of volume and they might be a tougher, you know, if you look at them in the whole and the aggregate, they might be a tougher slog, but there's businesses within those categories that are just gems, and it really comes down less to the category and more, is it like, what's the trajectory of the profit this business throws off? You know, a great restaurant will receive high demand, but there's lots of struggling restaurants out there. Right, as we all know. So it really depends. And I just say there's good businesses everywhere, and entrepreneurs are more focused on that and less focused on the category.

Gene Marks (15:52)

You know, I find myself as I get older saying it depends a lot as well. You know, it's just because you just realize that there's no black or white answer to any specific, you know, question. You know what I mean? That does make sense.

Bob House (16:05)

Small business is so big. It's such a massive part of the, you know, U.S. economy. You can't just put it in one.

Gene Marks (16:12)

You can't. You can't do that. What about you? Like, what would you do after? I mean, you've been doing this now, what'd you say, 60 years, 70 years?

Bob House (16:18)

Fourteen years here.

Gene Marks (16:21)

What would you, where would you buy if you, you know, say I gave you a million or a couple million bucks? All right, Bob, you've been doing this for a while. You've seen them all out there. You know, what kind of business would you buy?

Bob House (16:31)

I'm going to respectfully pass on that question. I actually enjoy building…

Gene Marks (16:37)

Coward.

Bob House (16:38)

I enjoy building the marketplace and the solutions that help bring this community together to help everyone achieve their goals. There's so many cool businesses that we come across and think, oh, that'd be fun, but I actually really enjoy the perspective of where we're at.

Gene Marks (16:54)

Okay, so you want to keep yourself above the fray and be objective, and it's not...

Bob House (16:58)

I'm not gonna play favorites. We love all of our listings equally.

Gene Marks (17:02)

Fair enough. Fair enough. I'm going to give you another. thing and, you know, and just get your take on this as well. I mean, I have younger people, I mean, obviously younger generations today, you know, they want to be millionaires after, you know, working for a week, you know, or whatever. And I guess no different than any other generation, you know, but, you know, it's important to put your time in and get, you know, get your work done. But at some point when people do want to start up a business, give me your thoughts on starting up a business from scratch versus buying an existing business. I am sure you have had this conversation before. Share with us your wisdom on that.

Bob House (17:40)

Absolutely. I mean, it's much easier to start an existing or to buy an existing business that has customers, trained employees, licenses and permits, a customer base that is, you know, knows you, than to start something from scratch. It's hard to get people to go somewhere new versus go to what they're familiar with. So, there's always great opportunities to take something and build on it. Some of the biggest success stories in American capitalism are stories like that. McDonald's and Starbucks and many others. So yeah, I mean, there's, it's just, you know, you can look at it from a risk profile, and it's just a lot riskier unless you have something completely novel, a new idea that's just not out there. You're, you know, you're better off looking at established businesses and seeing what you can do with them. See the opportunity not realized by the current owner and figure out a way to pay for what the owners, the value the owners built, but then take it to the next level. So, you know, I think this is why entrepreneur through acquisition and business schools are now teaching this. It's a recognized way to build wealth at a lower risk.

Gene Marks (18:50)

Yeah, and you know, I, you're 100% right. And you know what, the advice I give is just what you just said. I also say like, you know, what, if you're looking to buy a business, you know, there's something to be said for taking a job at the business that you want to acquire for maybe a year and working along as just a salaried employee along with the owner and learning it and then, you know, with the agreement that, you know, you'll turn this around and buy them out. But getting the experience is great. You're absolutely right. It's, you know, a business itself builds up its brand. It's got its infrastructure, it's got its employees, all that kind of stuff. How about ESOPs? Do you guys ever, you know, you, do you get involved on your platform in, you know, an employee stock ownership plans? You know, do brokers get involved in that? If I have a client that's interested in maybe starting an ESOP, could they go to BizBuySell to learn more about it or get connected to somebody to help them?

Bob House (19:43)

You know, it's, it's come up. I can't say I'm an expert in that arena. I think we probably have some content on our site about it, if you actually search our learning center. I don't think it's a mass, it's not a big part of the overall way that these businesses are, are being transferred. But they're there, and I believe they're likely growing in interest and popularity, but I think they're still a small fraction of how businesses are bought and sold.

Gene Marks (20:15)

Your reticence in your reply says it all. So, yeah, that, you know, I can understand that is still not some kind of an overwhelming decision right now, but it is an option, so that's good. The business owners that you have been dealing with, that you've come across over the years, you mentioned about them overvaluing their business. You know, because everybody walks around and we do that ourselves. We have an inflated opinion of ourselves, let alone the business that we built over the past 30 years. That doesn't surprise me. What does surprise, besides the value, the valuation of a business, what else surprises business owners when it comes time to sell? You know, what you know, what are some of the things that they, you found they weren't, they weren't expecting this to be part of the transaction or the requirements?

Bob House (21:01)

Yeah, our data and all the other data we've seen in the industry, you know, just repeats time and time again that they're woefully unprepared. And you know, they don't have clean books. You know, there's a saying you can't get paid twice. You know, if your income isn't reported or documented, don't expect a buyer to pay for that when they come to buy your business. So, you know, establishing you know, three years of clean kind of tax return, defendable, you know, income statement and balance sheets that tie to your, your P&L is really important. You know, owners tend to overestimate their business value because they base it on what they need to retire versus what the market says it's really worth. They focus more on top-line revenue versus true defendable, transferable cash flow and normalized cash flow. You know, they're too involved themselves in the business. And so that's you know, key-person risk or if they have employees who are key-people risk, it's harder to transfer. And so, the, you know, the saying is if you can take a month off from your business and it doesn't suffer then you've just made it more valuable. But a lot of owners are their business and are so close to it that if they walk away it's going to be hard for someone else to step in and buyers will discount that.

Gene Marks (22:32)

No doubt, no doubt. That's like The E-myth. You know, Michael Gerber's book from a thousand years ago and I remember him giving the example of you know, a McDonald's franchise is a perfect example of a great small business only because you know, a manager leaves, you know, you hire the other one to give them the playbook. There's procedures, there's policies, there are processes like the owner doesn't have to be there all the time. It's just, you know, it just gets run and that takes away a lot of value in somebody's business. You know, do you find that most businesses in the end get sold based on assets as opposed to multiplier of income? You had mentioned that everybody's looking for that dream, you know, the laundromat-type of thing. But where do you feel that the trend in buying you know, goes?

Bob House (23:20)

Well if the business is profitable and generally has goodwill associated with it, it's going to trade for a multiple of that kind of, you know, adjusted, you know, cash flow or EBITDA. If a business is struggling or is not profitable, then it will sell for the value of its assets, most likely. So, you know, most of the businesses, and we do have asset sales, but most of the opportunities on our platform are established ongoing concerns with, you know, a profit stream. And so, you know, those are valued as multiples of those of that, you know, SDE, seller's discretionary earnings, which is the cash flow to generate bad business where you add back, you know, appropriate add-backs like the owner's salary and any, you know, a one-time expense that is not a normal part of the business operation. So, you know, the multiples are pretty steady. They've been between, you know, two and a half to three for kind of the averages across our platform. Bigger businesses command higher multiples, but that's how they're going to trade.

Gene Marks (24:32)

That is fascinating. And obviously you're not wrong. I mean that's, it's interesting the trend goes that way only because, you know, so many of my clients, Bob, are like, you know, manufacturers, job shops, service companies, you know, whatever. I, you know, I have clients are my age, you know, their 60s, you know, they've been doing this for 30, 40 years, and you ask them like, you know, so you know, what's the outlook look like? And they all across the board, everybody says to me like, well you know, next three or four months look okay, after that, beats me. You know, we fall off a cliff, right? These are like established decades-old businesses, you know. So, but you're saying that like regardless of that, if a business, even regardless of their industry, if they have proven that they've been profitable over the years and they can show that on their tax returns, on their financial statements, they tend to more generally sell as a multiplier of their incomes. It could be there's different ways to calculate income. Like you just said seller's discretionary bit, but that is, that's generally what you're finding. Am I saying that correctly?

Bob House (25:32)

That's correct, yeah. And you know, what a buyer wants to see is steady, hopefully growing profit. A sector that is, you know, there's a lot of things that goes through a buyer's mind, right? You know, dependence on any owners or you know, revenue concentration or key vendor risk or you know, a whole slew of potential concerns. But at the end of the day, businesses that mitigate those risks and have growing profit are going to be able to trade it for a multiple of that profit.

Gene Marks (26:05)

That's great. All right that is very, very helpful. All right, we're almost done here. I just want to go back and just get some advice from you. I mean, again, you said you've been doing this for 60 years. Is that what you said?

Bob House (26:15)

Fourteen.

Gene Marks (26:16)

Fourteen, sorry. I must have misheard that. So, say you've got a potential buyer and you've got a potential seller. You've got a lot of experience, you've seen it all. Give me one, your biggest piece of, you've had to have heard this question, I mean, give me your biggest piece of advice for somebody looking to sell their business. Give me your biggest piece of advice for somebody who's looking to buy a business. The floor is yours.

Bob House (26:39)

It's the same, it's the same advice, preparation. So, for the seller, it's everything I've talked about already. Prepare three years ahead, get your business pre-qualified for SBA financing. It'll attract more qualified buyers. For buyers, it's the same thing. Get yourself pre-qualified, do your homework and due diligence, Be ready to act. There's this misconception out there that the buyers are in the driver's seat. The buyers are in the driver's seat for struggling businesses, for sure, or marginal businesses. For quality businesses, there's a lot of competition for these deals. So look at it more as an interview for a job than I'm going to dictate the terms of this deal. You're probably competing with private equity firms, you know, search fund, ETA buyer, you know, a bunch of individual owner-operators, a strategic buyer. You got to be prepared to act, and you have to present yourself and your experience, your financial qualifications in a way that shows that you're going to be the person to take this business. And, you know, the lenders want the lowest risk possible. The owners want somebody to carry on the legacy of that business and take care of their employees and their customers. So, you know, you have to compete for these deals, for the better deals.

Gene Marks (28:03)

Great advice. No, great advice. Great advice. Well, Bob, the only, again, I just, I have to say when I asked you what kind of business you would buy, and I know you were trying to be independent, but it's an ice cream shop, right? I mean, come on, who are we kidding here?

Bob House (28:16)

We all love ice cream.

Gene Marks (28:18)

We all love ice cream. So that's, you know, that's kind, that should be your standard answer going forward. Who's going to argue with you on that? Bob House is the president of BizBuySell one of my favorite sites. Again, if you are looking to buy or sell a business, it is the place to go to not only get connected to a broker, but to learn everything you need to know to buy or sell a business. It is just a great resource. It has been around for a long time and I've been a big fan for a long time. Bob, thank you so much for joining us. It's been a lot of fun. We will come back to you, I'm sure at some other point in the future we'll assess the market as well because we know that, you know, the market's gonna, it's gonna grow as everybody's getting older. It might not be a tsunami, but it's gonna grow. And I think the advice that you have is super valuable. So thank you for joining us.

Bob House (29:04)

It's a pleasure, Gene. I always enjoy it.

Gene Marks (29:06)

Yep, it's a lot of fun. Hey everybody, you've been watching or listening to this week's episode of the Paychex THRIVE Podcast. Thank you so much for joining us. If you need any help or advice or tips in running your business, get our Paychex Thrive newsletter. Go to paychex.com/Thrive. And also, please follow us on your favorite podcast channel or on YouTube. Thanks again for watching or listening. We will see you again next time. Take care. Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/WORX. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host, Gene Marks, and thanks for joining us. Till next time, take care.

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