The Market Is Down 10% and Clean Businesses Are Selling for More

Most coverage of a down market stops at the headline. Transactions fell 10%. Buyers are cautious. Financing is tight.

All true, and none of it tells you what to do.

The second number changes the picture. While volume dropped 10%, the average cash flow multiple went up 2%, to 2.7x. Median sale price barely moved, down 1% to $349,250. Total enterprise value across the quarter reached $1.8 billion.

Fewer deals closed. The deals that closed went for about the same or slightly more.

That’s a selective market rather than a soft one, and the difference matters if you’re planning to sell.

What “selective” means in practice

BizBuySell described the quarter as defined by stricter underwriting, deeper financial scrutiny, and greater emphasis on earnings durability.

Those are three separate filters your business has to pass.

Stricter underwriting is the lender. Most buyers in the $1M to $5M range need SBA financing, and the bar for approval rose before the new SOP takes effect October 1. If your tax returns don’t support the debt a buyer would take on at your price, the deal doesn’t get financed regardless of what you and the buyer agreed.

Deeper financial scrutiny is the buyer’s accountant. Add-backs that used to pass with an explanation now get documentation requests. Books that require your interpretation to make sense are a longer conversation than they were two years ago.

Earnings durability is the buyer’s judgment about whether the profit continues after you leave. That’s the owner dependency question in the language of financial analysis.

A business that clears all three competes for buyers in a market where fewer businesses clear all three. That’s why the multiples held.

Where the decline hit hardest

The 10% drop was broad, but some sectors took it harder. Manufacturing transaction values fell 14% quarter over quarter. Restaurants fell 16%.

Brokers surveyed for the report suggested this reflects buyer selectivity in more vulnerable industries, meaning businesses with thinner margins or more discretionary demand.

Service businesses made up 40% of all transactions in the quarter. Volume declined 11%, and median price held steady at $350,000. Volume down, price flat, matching the broader market.

If you’re in a service business, that’s your read on the environment. Fewer buyers moving, and the ones who move are still paying.

What brokers are saying about the rest of the year

The sentiment in the report runs more positive than the transaction count suggests.

Caleb Seegers of Exceptional Business Advisors described his outlook for the remainder of 2026 as genuinely optimistic, pointing to growth in ETA programs, an influx of buyers from tech layoffs, and a deeper buyer pool than the market has seen in some time. His summary of what the work requires now: helping sellers get prepared early, and pricing deals appropriately given the tighter financing environment.

Max Friar of Calder Capital put it more briefly. Bullish, and closings picking up.

Both of those are broker sentiment rather than data, and brokers have an interest in an active market. But the thing Seegers named as the job right now, preparing sellers early and pricing correctly, matches what the numbers show. Demand exists, and it’s concentrated on businesses that hold up.

What this means if you’re two years out

The takeaway from a selective market isn’t that you should wait for a better one.

It’s that the spread between a prepared business and an unprepared one is wider than it was, and widening spreads reward preparation more than rising markets do.

In a hot market, everything sells. Sloppy books get overlooked because a buyer doesn’t want to lose the deal to someone else. Owner dependency gets priced in without killing anything.

In a selective market, the sloppy business doesn’t sell at all, and the clean one gets full price because it has less competition. Same preparation work, larger payoff.

The businesses that closed in Q2 at 2.7x were financeable, verifiable, and durable enough that a cautious buyer stayed cautious and bought anyway.

What changes in October

The Q2 data doesn’t yet reflect the new SBA rules taking effect October 1.

Starting then, first-time buyers need to clear a 1.25x debt service coverage floor on historical earnings, with projections excluded. Every change of ownership requires an independent business valuation the lender analyzes. Deals at $3 million and above require a lender-ordered quality of earnings report.

The Q2 numbers describe a market that was already tightening. The rules formalize that tightening into policy, starting in about four weeks.

If your read was that you’d wait for conditions to loosen, conditions are moving the other direction. What’s holding steady is the price paid for businesses that survive examination.

Where that leaves you

Fewer buyers. Same prices for clean businesses. Tighter financing arriving in October.

None of that changes the work. It changes what the work is worth.

Three years of financials a stranger can verify. Operations that run without you. Contracts that transfer. Revenue that doesn’t depend on one customer or one relationship. That list is the same as it was. The payoff for finishing it went up.