Small Business Sales Hold Steady in Q1, Prices Rise 4% as Tariff Worries Loom

The business-for-sale market showed resilience in the first quarter of 2025, with transaction volumes holding steady year-over-year and rising 2% from the previous quarter. A total of 2,368 businesses changed hands, representing an enterprise value of $2 billion—a 9% increase compared to Q1 2024—according to BizBuySell, which tracks and analyzes U.S. business-for-sale transactions and sentiment from business owners, buyers, and brokers.

After declining 4% from Q3 to Q4 of 2024, momentum picked up at the start of 2025, with closed transactions rising 4% in January. The boost was likely driven by optimism around lower taxes, reduced interest rates, and fewer regulations under the incoming administration, as noted in BizBuySell’s 2024 year-end Insight Report.

"Q1 of 2025 definitely picked up speed compared to Q4 of last year. We wrapped up 2024 strong, but the new year came with a surge of momentum. I closed more deals, had more clients ready to move, and got some exciting projects off the ground—especially on the commercial real estate and business sales side. Overall, Q1 felt more energized and productive, and it’s looking like a great start to a big year," said Charles Patawaran of Gatsby Advisors Brokerage in Houston, Texas.

As President Trump took office and immediately introduced promises of new tariffs on foreign countries, buyers and sellers appeared to pause to assess the potential economic impact. Transactions slowed, with a 5% decline in February followed by a 2% drop in March. Deals also took more time to close, with businesses sitting on the market 15% longer compared to a year earlier, increasing from a median of 172 to 198 days.

“Tariff announcements have added a layer of uncertainty for both buyers and sellers. While not halting deal flow, they have increased costs for import-reliant businesses and caused some buyers to scrutinize financials more carefully. Sellers in affected industries may see slightly lower multiples or longer time on market as buyers assess future risk,” said Kinzie Jones of Sunbelt Business Advisors.

Still, buyers in Q1 remained focused on high-quality businesses and were willing to pay a premium. The median sale price reached $349,000, up 4% year-over-year, while the median cash flow increased 6% to $160,000, and median revenue rose 3% to $700,000.

“If a seller has a stable or growing business that is maintaining its margins and is somewhat shielded from AI or potential tariffs, that business will be a rocket ship on the market. Buyers will flock left and right. Conversely, if you are in a business that is likely to be disrupted in the next year and your 2024 performance faltered, it may be fairly painful for you on the market,” said Max Friar, managing partner and CEO of Calder Capital in Michigan.

As Friar noted, the word “disrupted” is key. Even businesses directly affected by tariffs may continue to succeed in today’s market.

Tariffs Bring Both Uncertainty and Opportunity to the Market

The unpredictable nature of tariff announcements and implementations has created significant planning challenges, leaving many businesses in limbo as they await clarity on whether to adjust pricing, inventory, and supply chain strategies. Success in this environment may hinge on the ability to pivot quickly, especially as the impact of tariffs varies widely across industries.

Among surveyed business owners, 37% reported increased costs due to tariffs, 17% experienced supply chain disruptions, and 9% saw a loss of international business. Of those facing rising costs, 57% are passing them on to customers, while 46% are seeing a decrease in sales. Overall, 26% of impacted owners reported reduced profitability.

“So far, the tariff increases have mainly led to higher raw material costs, making the final product more expensive and impacting customers. However, I believe this dynamic may change over time as the market adjusts,” said Ruben Valladares, owner of Adorgraf Corp in Florida.

Still, with tariff policies and rhetoric changing seemingly by the day, it’s difficult to determine the ultimate impact, if any, on business operations. In fact, 34% of respondents say it’s too early to assess the full effect of the tariffs.

Business owners are monitoring the situation closely, with some expressing concerns about potential long-term effects on costs, supply chains, and consumer behavior. For about one in five owners, however, there has been no impact yet. This mixed picture reflects the adaptability of small business owners, who are known for their resilience in the face of disruption.

“The uncertainty about tariffs and policy is far worse than the actual impact of them. Owners are adaptable - but they need clarity so they can adapt,” said Ryan Hemmert of Washington Business Brokers.

While business owners navigate tariff-related headwinds, most buyers (60%) say they remain undeterred in their search for the right opportunity. In fact, 10% say tariffs have accelerated their buying timeline as they look to capitalize on uncertainty or shifting valuations, especially for strong businesses that are favorable in any environment.

Demand Surges for Thriving Businesses as Corporate Refugees Seek Stability

While tariffs may have drawn out due diligence, 47% of brokers said they closed more deals than the same time a year ago, 18% significantly more. The top driver of improvement was a surge in buyers (30%), followed by strong demand for thriving businesses (21%).

“We are seeing more prospective buyers than ever for quality businesses. Buyers need to be organized, responsive, and ready to act when they see the right opportunity,” adds Hemmert.

Buyers echo this sentiment. Seventy-five percent (75%) of those surveyed are actively seeking stable, recession-resistant businesses, followed by 54% looking for thriving businesses. Just 21% are open to underperforming or turnaround opportunities. Profitability remains the top priority for 49% of buyers, with 12% primarily focused on growth potential.

In uncertain times, reliability reigns supreme and the flight to safety is even more pronounced in today’s cloudy economic climate. This is especially true for first-time buyers and those transitioning from the perceived security of a steady paycheck. Forty-five percent (45%) of buyers say they want to leave their current job, while another 19% are recently unemployed.

These “corporate refugees” are entering the market in droves, seeking financial independence (77%), more control over their careers (72%), better work-life balance (54%), and an escape from corporate politics (44%).

“I think owning a business can give me the financial freedom I so much seek. I also believe buying a business as opposed to starting one is the way to go since you are buying a business that will hopefully be making money from day one. I also think owner financing, if available, would be a great added benefit,” said Samuel Waweru, a buyer based in Iowa.

Many of these buyers achieved success working for others and are now looking to apply that knowledge to build something of their own.

Others see business ownership as the next chapter in retirement, especially interesting given that their generation is also the main driver of supply in the market.

“Retiring from law enforcement after 28 years and look to own a store/grocery in a beach area,” says Dave O. from Florida.

Additional buyer motivations include a wide variety of available businesses (32%), emerging opportunities (32%), and expectations of favorable pricing (31%).

The service sector continues to dominate interest, with 61% of buyers focused on it. Retail (31%), technology (23%), and manufacturing (21%) follow, while 19% are pursuing opportunities in the restaurant space.

Manufacturing Sale Prices Surge 54% as Onshoring Interest Grows

The manufacturing sector saw a 54% increase in median sale prices over the past year, reaching $1,000,813. Median cash flow climbed to $345,831 - up 51% -while median revenue jumped 64% to $1,704,500. The number of closed transactions ticked up slightly by 3%, but deals took longer to close, with businesses spending a median of 265 days on the market compared to 189 a year ago.

These larger investments, which include metal product manufacturers, machinery, lumber, and furniture producers, come on the heels of the Trump administration’s steel and aluminum tariffs that went into effect on March 12, as well as anticipated policy changes affecting the lumber industry. This timing suggests growing interest in reshoring manufacturing operations, a trend that has gained momentum since the supply chain disruptions of the pandemic.

According to Raymond P. Dowd, managing partner and principal broker of PNW Business Brokers in Oregon, LLC, “High demand for domestic manufacturing capacity to offset the impact of tariffs on imported goods” led to significantly more deals for his brokerage in the first quarter compared to the same period last year.

While onshoring is in favor, savvy entrepreneurs should also consider the ripple effects in sectors that support or serve these manufacturers.

Risk-tolerant entrepreneurs should keep an eye on import-dependent manufacturers for potential turnaround deals but be proactive about financing. This is especially important for those using SBA loans, as lenders are tightening risk and prioritizing American-made businesses under the SBA’s new Made in America Manufacturing Initiative.

Service Businesses Continue to Attract Buyers in Q1 Despite Lower Prices and Weaker Financials

The service sector, which consistently accounts for the highest percentage of closed transactions, saw a slight uptick in Q1 activity, 2% more deals than the same period last year. However, financial metrics softened: both median sale price and revenue declined by 5% (to $310,000 and $526,395 respectively), while median cash flow held steady at $155,000.

Continued demand for service businesses isn’t surprising, as many offer low-risk entry points and consistent cash flow. Buyer interest remains particularly strong for essential services such as auto repair, healthcare, and plumbing.

“[Tariffs] have created nervousness and uncertainty. Buyers are looking for service businesses not as likely to be impacted.,” notes Art Warsoff of Transworld Business Advisors of Utah County.

In contrast, discretionary service businesses, such as entertainment venues and travel agencies, are facing headwinds as consumers pull back on non-essential spending amid rising costs for food, fuel, and other necessities.

Retail and Restaurant Sales Dip as Consumers Cut Discretionary Spending

As consumers tighten their budgets on non-essential purchases, retail and restaurant businesses reported fewer closed transactions with weaker financial performance. Both sectors, which already grapple with the dilemma of whether to increase prices or accept thinner margins, are finding it difficult to attract customers who are cutting back.

Restaurant deal volume in Q1 2025 was down 4% year-over-year, with median sale prices dropping 11% to $200,000. Median cash flow declined by 4%, while median revenue slipped 3%. For some, this might prove to be an opportunity.

“My industry is restaurants and I believe there's oversaturation and a lot of poorly run operations. I think in this year there will be great opportunities to find a restaurant in a good location that's managerially broken that I can fix with my experience,” said James Williams, a buyer in South Carolina.

Retail fared slightly worse, with the number of closed transactions falling 7%. Median sale prices declined 4%, cash flow fell 14%, and revenue dipped 4% compared to the same period last year.

Despite these headwinds, there are signs of buyer confidence. The cash flow multiple for retail businesses rose from 2.75 to 2.88, suggesting that while current performance is softer, buyers are placing a higher value on businesses with steady, reliable earnings.

Seller Financing Is the Friend You Need in Today’s Market

The majority of brokers (62%) consider seller financing very important in today’s market, especially when it comes to securing SBA loans. Buyers agree as 54% rate seller financing as either “extremely important” or “very important” to their purchase decision, while another 29% consider it “somewhat important.” Despite buyer expectations, many sellers remain hesitant to offer financing. Only 19% of business owners plan to offer seller financing when they exit, while 42% do not intend to provide this option, and 39% remain unsure.

“As many SBA lenders are tightening their reigns and narrowing their lending appetite, seller financing is more important than ever to help get deals completed successfully.” Terri Stallworth, business broker, Florida Business Exchange, Inc.

“Interest rates are still high and approvals on SBA funding is tighter so seller financing offers greater flexibility to get deals done more quickly,” adds John Inzilla of Murphy Business Sales.

Seller financing is increasingly important for deal structure, especially for businesses affected by tariffs where traditional lending may be tough to secure. It can also help offset higher interest rates, offers sellers a decent return, and makes deals more accessible for buyers. Sellers may also benefit from potential tax advantages by spreading out income over time rather than taking a lump-sum payout.

While seller notes are subordinate to primary financing, they typically include personal guarantees for added security to the seller. For buyers using SBA financing, seller notes benefit from the bank’s rigorous due diligence, which ensures buyers can reasonably service both loans.

2025 Market Outlook: Navigating Opportunity Amid Uncertainty

The small business market in 2025 presents a nuanced landscape, blending cautious optimism with growing concern about the broader economic outlook. A major driver of market activity is the ongoing wave of retiring baby boomer business owners—commonly referred to as the “Silver Tsunami.” This demographic shift is unlocking a wide array of acquisition opportunities, particularly in recession-resistant industries.

Meanwhile, business buyers are entering the market in record numbers, showing adaptability to the current interest rate environment. 65% report they are not delaying their acquisition timeline, despite rate conditions, while just 20% are holding out for potential rate cuts. A majority of brokers (64%) also believe any future rate reductions won’t significantly alter deal flow.

However, policy uncertainty, especially around tariffs and trade, continues to cast a shadow. Concerns over inflation, interest rates, and economic growth echo the unease seen during the 2018 China-U.S. trade war. In fact, 60% of business owners and 58% of buyers believe a recession is either underway or imminent. Similarly, 43% of brokers cite a potential recession as their top concern heading into the second half of the year.

Despite these challenges, participants are poised, waiting for economic clarity and the financial relief it may bring. Conditions like these, while daunting, often offer some of the best windows for unlocking value.

For buyers, now is the time to understand the landscape, both the headwinds and tailwinds. Businesses facing challenges might present more negotiation room, while others in stronger industries may spark bidding wars.

“I would advise buyers to do your homework on any business you are considering, both from macroeconomic and microeconomic perspectives. ‘This too shall pass’ so knowing this is temporary can be a great time to buy so you're ready for the huge upside coming,” said Evan Meester of Results Business Advisors (RBA).

An oft forgotten homework assignment, locking in a lender and prequalifying for SBA financing, should be high on the buyer checklist.

“Some banks are offering special programs and reduced rates. I've seen some rates as low as 7.5%. Compare numerous banks for a good SBA lender with favorable rates. Smaller banks are getting creative, that is a good place to start. A preferred SBA lender with a reasonable rate or a good adjustable rate is the best choice,” said Katrina Loftin of M&A Business Advisors in Nevada.

For sellers, focus on fundamentals. With inflationary pressure and shifting consumer behavior, businesses that maintain strong cash flow, low debt, and high customer satisfaction will be best positioned to attract serious buyers and drive value.

“While it may not ‘feel’ like the right time to sell, if your sales/profits are stable or growing and you operate in an industry that is resistant to tariff fallout or AI disruption, now is an excellent time to sell. Businesses that are in home services or commercial maintenance - HVAC, plumbing, electrical, decking, roofing, landscaping, asphalt - these are all hot tickets,” says Max Friar.

Whether you're a buyer navigating the market or a seller eyeing an exit, the key in 2025 is in being prepared. In uncertain markets, preparedness and timing matter more than ever. Opportunities are out there, but they’ll go to those who are ready.