20 Years of Evolution in Business Brokerage:

April 23, 2025


 

Introduction

Over the past two decades, the business brokerage industry has undergone a dramatic transformation, especially in the lower middle market – generally defined as business sales with an enterprise value between $1 million and $10 million. These smaller M&A transactions play a crucial role in transferring ownership of companies that form the backbone of the economy. In the early 2000s, business brokerage was a highly localized, relationship-driven field. Fast forward to the mid-2020s, and it has become a dynamic, technology-powered industry facilitating an unprecedented transfer of wealth between generations (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). This article explores general industry trends across all sectors, examines how Texas in particular has experienced these changes, and looks at how business valuations have shifted over the last 20 years. Key statistics, expert insights, and notable trends are highlighted to illustrate this evolution.

From Local Listings to Online Marketplaces

In the mid-2000s, business brokers primarily relied on local networks, classified ads, and in-person meetings to connect buyers and sellers. Data on market trends was limited, transactions involved extensive manual analysis, and there were relatively few listings available at any given time (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). Today, the landscape is virtually unrecognizable by comparison. Online marketplaces like BizBuySell, LoopNet, and others have revolutionized how businesses are bought and sold. These platforms provide nationwide (and even global) visibility for business-for-sale listings, vastly expanding the reach of each deal. In fact, data shows the number of businesses listed for sale in the U.S. has grown by over 50% since 2015 – a surge fueled in part by baby boomer owners looking to exit their companies (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity).

The adoption of technology has democratized the process of selling a business. Powerful listing sites and digital marketing mean a broker in Texas can attract buyers from New York or even overseas with ease. This globalization of deals increases competition and opportunities, as what was once a pool of mostly local buyers now includes investors across the country and around the world (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). Data-driven decision making has also become a hallmark of modern brokerage – brokers today leverage sophisticated analytics tools for valuation, comparable sales data, and buyer behavior insights, allowing for more accurate pricing and better matches between buyers and sellers (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). The result is greater transparency and efficiency: processes that once took many months can often be completed faster with the aid of digital tools and virtual collaboration (e.g. virtual tours and remote due diligence), which were unheard of 20 years ago. As veteran broker John Mitchell observes, “What began as a more localized, relationship-driven business has evolved into a dynamic, technology-powered industry that is increasingly essential to the transfer of wealth between generations.” (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity)

Demographic Shifts and the “Silver Tsunami”

Perhaps the single biggest driver of change in the business sales market over the last two decades is demographic: the aging of the baby boomer generation. Baby boomers (born roughly 1946–1964) owned a huge number of privately-held companies, and as they reached retirement age en masse, a wave of business ownership transfers began – a phenomenon often dubbed the “Silver Tsunami.” According to U.S. Census data, as of 2018 about 51% of U.S. business owners were age 55 or older (What I've Learned: Business Brokers - by Taft Love - Substack), signaling that a massive turnover was on the horizon. Industry experts estimate that nearly 2.3 million boomer-owned businesses will be sold or passed down by 2030 (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). This generational wealth transfer has fundamentally reshaped the brokerage industry by flooding the market with small and mid-sized businesses for sale.

One outcome of this trend is rising seller competition. With so many businesses coming to market, sellers must now ensure their companies are as attractive as possible – financially solid, well-managed, and prepared for a transition – to stand out to discerning buyers (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). In the 2000s, a business owner looking to sell might have faced a moderate number of local competitors also seeking buyers. By the 2020s, that same owner may be one of thousands of similar-aged entrepreneurs nationwide trying to sell, which raises the bar for quality. On the positive side, the Silver Tsunami means buyers have more choices and brokers have more potential deals to broker than ever before. The volume of business-for-sale transactions has indeed increased over time (with some cyclical ups and downs), and brokers who successfully tap into this wave can thrive for years to come.

Trends in the Lower Middle Market (All Industries)

The lower middle market – broadly, sales of businesses valued around $1–$10 million – straddles the line between “main street” small businesses and larger middle-market mergers. Over the past 20 years, several general trends across industries have emerged in this segment:

  • Higher Overall Deal Volume: More small companies are changing hands now than in the mid-2000s. There are an estimated 33 million small businesses in the U.S., and projections suggest roughly 12 million of them will be sold in the coming 10–15 years (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth). This surge is largely due to retiring owners, but also a growing acceptance that selling a business is a standard part of the entrepreneurial lifecycle. Even with this increase, the market is still considered under-served by brokers – only 20% of businesses sold are handled by business brokers, meaning 80% are sold by owners themselves (or not sold at all), indicating significant room for brokerage growth (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth).
  • Expanded Buyer Pool: The profile of buyers in the lower middle market has broadened. Two decades ago, many buyers were local individuals or competitor companies. Today, the buyer pool includes more institutional and out-of-region players. For example, lower middle market companies now attract interest from small private equity funds, search fund entrepreneurs, and strategic buyers looking for bolt-on acquisitions. The introduction of SBA-backed acquisition loans has further expanded buyer accessibility – financing options like SBA 7(a) loans have made it easier for first-time buyers and entrepreneurs to purchase businesses in this value range (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). Brokers increasingly guide clients through financing processes as part of the deal. The availability of capital (especially the era of low interest rates in the 2010s) drew more buyers into the market, including corporate professionals looking to “buy a job” and run their own company, as well as investment groups seeking modest-sized acquisitions.
  • Professionalization of Brokers: The industry itself has matured and become more professionalized. There are now over 1,500 business brokerage firms in the U.S., employing roughly 8,800 brokers (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth). Many brokers enter the field with strong financial or corporate backgrounds, and professional designations (like the Certified Business Intermediary, CBI) are more common. Training and ethical standards have risen via organizations like the International Business Brokers Association (IBBA) and state associations. Franchised brokerage networks have also grown significantly – the top 4 brokerage franchises (Transworld, Murphy, Sunbelt, and First Choice) now operate 724 combined offices, with those franchise offices averaging much higher revenue per office than independent firms (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth). This indicates a consolidation of expertise and branding, where large networks leverage best practices and technology to outperform the industry average. In Texas, the Texas Association of Business Brokers (TABB) – founded in 1979 – is noted as the nation’s oldest business broker trade association (Home - Texas Association of Business Brokers), reflecting how long the profession has been evolving in that state. Through such organizations, brokers today have better support, education, and networking than their predecessors did 20 years ago.
  • Use of Technology and Data: As mentioned, technology is a game-changer. Brokers now routinely use Customer Relationship Management (CRM) systems to track buyers and manage deal flow, digital marketing to confidentially advertise listings, and analytic software to value businesses. This tech-centric approach was virtually nonexistent in the early 2000s. Today’s brokers can quickly access industry benchmarks and valuation multiples for specific sectors, leading to more data-driven valuations rather than pure guesswork or rule of thumb. For example, information on buyer behavior and sector trends is readily available, helping brokers advise sellers on timing (e.g. selling when their industry is “hot”). Sectors like technology and healthcare have seen especially robust buyer interest in recent years, whereas some traditional brick-and-mortar retail businesses have struggled unless they adapted. Industry reports noted that even during the pandemic, tech sector businesses thrived (e.g. those supporting remote work or telehealth) and remained in high demand, whereas in-person dependent businesses took longer to recover (News - Austin Dale Group, Inc.). By 2022, service industries (including financial and healthcare services) were leading small business sale activity – comprising 39% of acquisitions on one major listing platform, with service business sale counts up 7% year-over-year and their median sale prices exceeding pre-pandemic levels (Expectations for Business in 2023 - Texas Association of Business Brokers). In short, every industry’s businesses can be sold, but the tailwinds or headwinds they face (economic cycles, consumer trends, etc.) now show up quickly in the market data brokers monitor.
  • Changing Seller Motivations: Retirement has become the dominant reason for selling a business in this period, a shift from 20 years ago when sales might have been more often due to burnout or unsolvable business challenges. A recent survey found 45% of owners sell primarily to retire (Expectations for Business in 2023 - Texas Association of Business Brokers). Other owners are accelerating their exit plans due to economic uncertainties; for instance, concerns about a potential recession have prompted more baby boomers to list their businesses sooner rather than later (Expectations for Business in 2023 - Texas Association of Business Brokers). The COVID-19 pandemic also influenced seller psychology – after the shock of 2020, many owners reassessed their appetite for risk and decided to cash out while they could. As one Texas-based M&A attorney noted, the unpredictable events of 2020 “shook a lot of sellers” into realizing maybe it was time to sell or diversify their wealth (Texas M&A: 2020 deals mostly involved lower middle-market firms - Dallas Business Journal). This mindset shift contributed to a busy seller market in the subsequent years.

Rising Valuations and Market Cycles

Business valuations in the lower middle market have generally trended upward over the last two decades, though not in a straight line. In the mid-2000s, a typical small business might sell for roughly 2–3 times its annual cash flow (SDE or EBITDA), depending on its size and industry. Valuation multiples tended to be modest, and many deals were based on asset values or simpler formulas. As the market matured and demand grew, multiples for healthy businesses crept up. By the late 2010s, amid a strong economy and abundant financing, valuation multiples reached new heights. One industry survey shows that for companies with around $1 million in annual EBITDA, the average sale multiple was about 4.3× EBITDA, higher than the ~3× multiple seen for businesses with $500k EBITDA (2019 Pepperdine Private Capital Markets survey | by Simon Cook | Medium). In other words, buyers became willing to pay premium prices, especially for larger or well-performing companies in the $1–10 million value range (which often corresponds to that earnings level). Robust buyer competition – including from private equity – drove this trend. Quality companies with solid earnings, recurring revenue, or growth potential started commanding 4×, 5×, even 6× EBITDA in some cases, whereas very small “main street” businesses might still trade around 2× earnings.

Concrete data underscores how valuations climbed and fell with market cycles. Heading into 2020, the small business sale market was on a multi-year upswing, with strong financials and high multiples for sellers. The median sale price of a small business reached about $275,000 in 2019. Then the COVID-19 shock hit: the number of deals plummeted by 22% in 2020, the largest drop in a decade (comparable to the 28% drop seen during the Great Recession in 2009) (BizBuySell Insight Report- Acquisitions Drop 22% in 2020, Thriving Businesses Sell at Record Prices - Evolution Advisors). Yet, somewhat counterintuitively, valuations during 2020 held firm or even rose – the median sale price increased 12% to $279,950 in 2020 despite fewer transactions (BizBuySell Insight Report- Acquisitions Drop 22% in 2020, Thriving Businesses Sell at Record Prices - Evolution Advisors). This was because only the strongest, “pandemic-proof” businesses sold (weaker businesses were pulled off the market), pushing average revenue and cash flow of sold companies to record highs (BizBuySell Insight Report- Acquisitions Drop 22% in 2020, Thriving Businesses Sell at Record Prices - Evolution Advisors).

By 2021, the market roared back. The pent-up supply of sellers and the surge of eager buyers (helped by low interest rates and even stimulus-driven savings) led to a banner year. Small business transactions rebounded +14% in 2021 and even surpassed pre-pandemic levels by Q4 of that year (Sales of Small Businesses to Close 2021 Top Pre-Pandemic Levels) (Sales of Small Businesses to Close 2021 Top Pre-Pandemic Levels). With limited inventory of healthy businesses on the market, buyers competed fiercely, and sale prices jumped. The median sale price hit a record high of ~$325,000 in 2021, a 16% year-over-year increase (Sales of Small Businesses to Close 2021 Top Pre-Pandemic Levels). According to BizBuySell data, this was the highest median price since tracking began, and it pushed the average cash flow multiple to roughly 2.55× (up from ~2.3–2.4× a few years prior) (Small Business Acquisition up 4.7% in 2022). Brokers reported that demand for profitable, resilient businesses was so strong that more than half of them attributed rising prices to buyers “bidding up” the best opportunities (Sales of Small Businesses to Close 2021 Top Pre-Pandemic Levels).

Moving into 2022 and 2023, macroeconomic factors began to cool valuations slightly. A sharp rise in inflation and interest rates made buyers more cautious and increased the cost of financing acquisitions. The market still grew – 2022 saw about a 4.7% increase in small business sales volume over 2021 – but median sale price dipped a bit (down ~3% to $315,000) as the froth of 2021 subsided (Small Business Acquisition up 4.7% in 2022) (Small Business Acquisition up 4.7% in 2022). The average cash flow multiple edged down from 2.55 to 2.53, essentially flat (Small Business Acquisition up 4.7% in 2022). By late 2022, nearly 47% of business brokers surveyed felt the market had shifted to favor buyers slightly, citing higher interest rates causing buyers to be more price-sensitive (Expectations for Business in 2023 - Texas Association of Business Brokers). To close deals, many sellers had to show flexibility through terms like seller financing, which has long been a feature of lower middle market deals. (In fact, about 90% of buyers say seller financing is important to them, and 95% of brokers encourage sellers to offer it (Expectations for Business in 2023 - Texas Association of Business Brokers) – a statistic that’s remained consistent, if not grown, over the years as credit conditions tighten and trust becomes key to bridging valuation gaps.)

Over 20 years, the overall valuation landscape has shifted to reward well-run businesses with higher multiples, while poorly performing businesses are less likely to sell at all. The market has become more efficient at pricing risk: for example, in 2005 a mediocre business might still find a buyer at some price, but in 2025 a mediocre business will struggle to attract interest unless at a steep discount. Conversely, a company with strong cash flows and growth prospects can attract multiple bidders and achieve a premium. The presence of more sophisticated buyers and readily available market data has tightened valuation ranges – sellers are less often able to demand unrealistic prices without justification, because buyers will point to comps and benchmarks. Still, seller optimism can be a challenge; brokers frequently must educate owners on fair market value. As one industry commentary noted, many entrepreneurs tend to overestimate value, and brokers have had to become adept at managing expectations and backing valuations with data (Unrealistic Business Valuation Expectations - InvestmentBank.com).

Regional Spotlight: Texas

Texas offers a clear microcosm of how the business brokerage industry’s evolution has played out regionally. As one of the largest state economies in the U.S., Texas is home to over 3.2 million small businesses – about 10% of all U.S. small businesses – which collectively employ nearly half of the state’s workforce (4 Facts to Strengthen Resilience for Texas' Small Businesses). Over the past 20 years, Texas has seen booming economic and population growth, which in turn has led to a robust market for buying and selling businesses. Key Texas metro areas (like Dallas-Fort Worth, Houston, Austin, and San Antonio) have become hotspots for lower middle market activity. Dallas, for example, is known as an extremely entrepreneurial region with many growing companies. One local M&A attorney observed that North Texas is “very fertile ground for middle-market deals”, noting that the region is adept at growing businesses into the tens of millions in value and then they get sold to larger investors (Texas M&A: 2020 deals mostly involved lower middle-market firms - Dallas Business Journal). This highlights a cycle where Texas entrepreneurs scale companies and then exit, fueling the brokerage industry’s deal flow.

In terms of industry mix, Texas has diversified significantly since the early 2000s. While energy (oil & gas) related businesses have always been a part of Texas M&A, the past two decades saw the rise of technology, healthcare, and services in the state’s economy. By 2020, even as low oil prices dampened traditional energy deals, technology deals were thriving in Texas’s middle market (Texas M&A: 2020 deals mostly involved lower middle-market firms - Dallas Business Journal). Austin’s emergence as a tech hub and the influx of corporate relocations to Texas have increased the number of potential buyers and investors based in the state. This dynamic growth environment has likely led to higher valuations for Texas businesses in attractive sectors (tech, cybersecurity, medical, etc.), while more cyclical industries (e.g. oilfield services) have seen valuations swing with commodity prices.

On the brokerage profession side, Texas has a strong community of business brokers. The Texas Association of Business Brokers has been active for decades in promoting education and professional standards, and many Texas brokers hold IBBA credentials as well. Notably, Texas is among states that require a real estate license to broker the sale of a business if it involves real property – a regulatory facet that has changed over time and influences how brokers operate (many have dual licenses in real estate and business brokerage). Over 20 years, Texas brokers have had to adapt to the same technological and market forces as elsewhere, but with the added benefit of a generally pro-business climate. The high volume of entrepreneurially minded individuals in Texas means there’s a steady supply of both buyers (e.g. corporate refugees moving to Texas and looking to buy companies) and sellers (boomer owners on ranches, oil fields, factories, and Main Street shops alike looking to retire). As the Silver Tsunami hits full force, Texas is poised to see a huge number of business ownership changes; with 3+ million small firms, even a fraction coming to market translates into tens of thousands of potential deals in the state. This has not gone unnoticed – private equity firms and search funds are increasingly scouting Texas for opportunities in the lower middle market, bringing more competition and sometimes driving up valuations for desirable companies.

Conclusion and Outlook

In summary, the business brokerage industry of 2025 is far more sophisticated, interconnected, and active than it was in 2005, especially in the realm of $1–$10 million transactions. Over 20 years, what was once a cottage, fragmented industry centered on local networks has evolved into a nationwide, tech-enabled marketplace with standardized practices and an expanding cast of participants. General trends such as the digitization of deal marketing, the aging of business owners, the influx of new buyers, and the rise in valuations have defined this evolution. Texas, with its large economy and entrepreneurial culture, exemplifies many of these changes – showing strong growth in deal activity and an increasingly vibrant lower middle market.

Valuations have risen overall, though not without periodic corrections. The late 2000s recession, the 2020 pandemic, and the recent interest rate hikes each tested the market’s resilience, but in each case the industry adapted and came back stronger. As of the mid-2020s, the market remains 80% untapped by brokers (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth), suggesting significant potential for further growth as more owners seek expert help to sell and more buyers recognize the value brokers add. With an estimated 8.5% annual growth forecast for the U.S. business brokerage industry’s revenues through 2030 (The $1.8 Billion U.S. Business Brokers Industry Is Poised for Growth), the outlook is optimistic.

Industry experts anticipate more consolidation and innovation ahead: we may see brokerage firms scaling up, new online platforms attempting to disrupt the traditional brokerage model, and continued integration of technology like AI for matching buyers and sellers. Nonetheless, the core skills of successful brokers – financial acumen, negotiation, and the ability to orchestrate a deal – remain as essential as ever. As one veteran broker noted, being adaptable and continually learning is key, because the only constant in this market is change (The Evolution of Business Brokerage: 40 Years of Change, Growth, and Opportunity). After two decades of profound shifts, the lower middle market brokerage field is now an established component of the M&A ecosystem, bridging the gap between small family businesses and large corporate transactions. If the past 20 years are any indication, the next wave (with the full force of the boomer “exit wave” and new digital tools) will further redefine how entrepreneurs change hands – in Texas and across the nation – with business brokers playing a central role in that transition.

Author: Scott Perry, Dallas chapter president | Gateway Mergers & Acquisitions | Connect with Scott on LinkedIn

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