Orange County Register

The asking price for small businesses in this area is going up at a time that actual sales are dropping, reports BizBuySell, a businesses for sale web site.

Are the owners like home sellers a couple of years ago, clinging to illusions about the real worth of their asset?

The median asking price for a business being sold in Orange-Los Angeles counties was $230,000 in the third quarter, 2.2% higher than in the second quarter of ‘08 and the same period a year earlier, according to BizBuySell.

Here’s a breakdown of active listings on BizBuySell for the Orange-LA area in the third quarter:

But look at businesses that actually sold. The actual number — 139 — was 23.6% fewer than the second quarter and the actual sale price dropped 22% to $180,000.

And those are the sales for which brokers and owners would give BizBuySell information. It’s more likely for sellers to report if they got top dollar than if they took a beating on the price.

Earlier this month, BizBen.com, another businesses for sale web site that concentrates only on California, reported September sales of Orange County businesses were at a two-year low, 152 businesses, and 39% behind September 2007. It was worse in Riverside County (down 71%) and Los Angeles County (down 57%). Click here to read about it.

BizBen President Peter Siegel explained that would-be buyers couldn’t get money: Banks are extremely tightfisted with credit, and buyers’ homes no longer have a lot of equity to pull out for a down payment on a business.

So why are asking prices going up?

It’s possible the businesses currently on the market are in thriving industries and more profitable than those for sale earlier in the year. BizBuySell reports the median of their reported revenues - $360,000 - is 2.9% higher and their cash flow is $92,166, up 2.2%.

But a more likely explanation is denial.

We have watched the housing slowdown go through its decline. When asking prices remained high, sales fell off a cliff. Sales have been picking up since prices have come down. Our housing expert Jon Lansner reports that median sales prices dropped 26.6% in a recent period and sales jumped 41.2%.

A coincidence? We don’t think so.

More economic news to ponder…

• Fed sees West’s housing slump as ’severe’
• AIG’s “outrageous expenditures” cause more trouble
• Homebuilders seem downright depressed
• O.C. investment experts say don’t buy yet — but get ready
• Yikes! What do I do with my money now?
• Should I bail on my 401(k)? Is my savings safe in my bank?
• O.C. job loss worst in 16 years
• O.C. pay raises half the U.S. average

More business sales stories…

• Sales of O.C. businesses hit 2-year low
• O.C. businesses much more affordable than homes
• Sale of O.C. businesses fell 22.6% in first half of  ’08
• O.C. business bankruptcies soar 153% in April
• 50% of business sales fall through

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