Small businesses with reliable earnings are still finding buyers, but owners hoping to sell face a more demanding market. Buyers are scrutinizing financial records, financing has become more difficult, and the gap between strong businesses and struggling ones is widening.

That divide emerged in BizBuySell’s third-quarter 2026 Insight Report, released October 20. The marketplace recorded 2,132 business sales during the quarter, little changed from the second quarter but 7% below the same period in 2025. At the same time, the median sale price climbed 17% year over year to $350,000.

The combination of fewer sales and higher prices does not mean every small business is gaining value. BizBuySell attributed much of the increase to a greater share of transactions involving larger, more profitable businesses. For owners considering a sale, the figures point to the importance of demonstrable earnings, realistic pricing, and a business that can operate without its founder handling every decision.

“Lots of buyers and a lack of good profitable businesses for sale,” said Gavin Raphael of Light & Raphael in Virginia.

Buyers Are Active, but Confidence Is Slipping

BizBuySell’s Buyer-Seller Confidence Index, which runs from zero to 100, shows growing unease on both sides of transactions. Buyer confidence declined from 52 to 49, while seller confidence slipped from 48 to 47. Both groups have now registered year-over-year confidence declines for two consecutive years.

The pressures differ depending on which side of the negotiating table a business owner occupies. Nearly three-quarters of owners reported higher fuel and energy costs, 67% said inflation was not easing, and more than half said customers were spending more cautiously. For buyers, uncertainty centers on valuations, borrowing costs, and whether a company’s earnings can support an acquisition loan.

Finding a suitable company was the biggest obstacle reported by buyers: 31% named the lack of quality businesses, compared with 15% who cited financing and 13% who pointed to sellers’ asking prices. Nearly half considered businesses on the market overvalued.

Yet the decline in sentiment has not brought deals to a halt. Some 73% of brokers said third-quarter activity was stable or stronger than in the previous quarter, while 66% expected transaction volume to increase over the following six months. Buyers appear less willing to overlook thin margins, inconsistent books, or a company’s dependence on the current owner.

“I believe it is still a very active market,” said John Inzilla of Murphy Business Sales in New Jersey. “More and more owners are looking to exit, however buyers have become very selective and are pushing for due diligence like Q&A ahead of an offer.”

Higher-Value Businesses Gain a Bigger Share of Sales

The clearest divide appeared at the $1 million sale-price mark. Businesses selling for more than $1 million represented a record 22% of third-quarter transactions. Sales above that threshold increased 8% from a year earlier, while transactions below $1 million declined 10%.

Businesses in the higher-priced group sold for a median $1.8 million and generated median cash flow of $559,000. Those below $1 million had a median sale price of $250,000 and median cash flow of $123,000. The average cash-flow multiple was 3.73 for larger transactions, versus 2.30 for smaller ones.

Higher-priced businesses also sold for an average 100.8% of their asking prices, compared with 93.6% among businesses priced below $1 million. These are averages across different transactions, not a promise that a company of a particular size will command the same valuation.

For a smaller owner-operated business, the lesson is not necessarily to hold out for a $1 million sale. It is to make revenue, expenses, customer relationships, and day-to-day operations easier for a buyer to verify and take over. A purchaser may value consistent cash flow and documented processes more highly than aggressive growth forecasts.

Service Firms Lead While Restaurants and Retail Lose Ground

Service companies accounted for 992 reported sales, or 47% of third-quarter transactions. Sales climbed 10% from the previous quarter and 9% year over year, reaching their highest quarterly level since the second quarter of 2022. The median service-business sale price was $350,000, up 21% from a year earlier, and median cash flow rose 18% to $157,378.

Buyers showed particular interest in specialized maintenance, repair, technical, and other commercial services, where repeat customers and essential work can help support revenue. Service businesses were identified as an area of buyer interest by 77% of surveyed brokers.

Manufacturing also recorded stronger prices despite largely unchanged transaction volume. The sector reported 105 sales, compared with 106 a year earlier. Its median sale price increased 58% to $807,000, while median cash flow rose 38% to $302,163. Those gains reflect the businesses that actually sold and should not be interpreted as a 58% increase in value for every manufacturer.

Consumer-facing businesses had a more difficult quarter. Retail sales dropped 12% year over year to 417 transactions, although the median sale price rose 13% to $272,500. Restaurant transactions fell 23% to 358, while the median price increased 7% to $235,000.

For restaurant and store owners, rising prices among completed deals may offer encouragement, but the falling number of sales points to a narrower pool of transactions. Buyers will likely focus on labor and occupancy costs, margins, customer demand, and how resilient the business would be if spending weakened further.

AI Use Is Rising, but Buyers Want Proof of Financial Value

The report also examined artificial intelligence adoption among small business owners. Some 68% said they use AI, up from 55% a year earlier. Among users, 76% reported improved business performance, including 26% who described the improvement as significant.

Marketing was the most common application, cited by 73% of AI users, followed by analytics at 61% and process automation at 46%. Those uses can range from creating promotional materials and reviewing sales data to reducing the time employees spend on repetitive tasks.

“Artificial intelligence has allowed us to do more with less. We would have needed many more employees and spent a lot more money to do what we are doing seamlessly with AI,” said Jonathan Espaillat of World Stage LLC in Virginia.

The reported productivity benefits have not translated into widespread staffing cuts. Fifty-one percent of owners using AI said it had not changed their staffing levels. AI users were also more likely than nonusers to say they planned to hire in 2027, 39% versus 20%, although those survey differences do not establish that AI caused the hiring plans.

For owners hoping AI tools will raise the selling price of their business, the findings are more restrained. Just 15% of buyers preferred a company that had already implemented AI, while 32% preferred to introduce it themselves. Half of owners preparing to sell said AI had little or no impact on what a buyer would pay.

That suggests a stronger sales case for technology when it produces measurable results, such as lower operating expenses, more predictable revenue, or better customer retention. Simply listing AI software among a company’s capabilities may carry little weight during negotiations.

Financing Rules Add Pressure to Business Acquisitions

Borrowing remains a major consideration, especially for smaller acquisitions. Seventy-eight percent of surveyed buyers expected to use Small Business Administration financing. Among brokers, 38% cited SBA funding as a leading financing obstacle, ahead of interest rates at 34%.

The report also pointed to tighter SBA-related underwriting requirements that took effect October 1, including expanded valuation and earnings reviews. Certain SBA-financed acquisitions and business expansions with purchase prices of $3 million or more now require an independent quality-of-earnings report. That additional scrutiny can make reliable historical financial statements and documentation more important during the sale process.

Eighty-six percent of buyers said it mattered whether a business had been prequalified for financing. For sellers, discussing lender expectations early and preparing tax returns, profit-and-loss statements, debt schedules, and support for earnings adjustments may help prevent delays. Buyers should establish how much equity they can contribute and whether the business’s documented earnings can support debt payments before making an offer.

“Get buyer ready. Have proof of funds and proof of equity injection, get SBA prequalified, and have a buyer profile. Good deals don’t last,” said Denise S. Houghtaling of Southern Country Business Advisors in Florida.

Seller financing may also help some transactions proceed when traditional borrowing proves insufficient, although owners must weigh the repayment risk and the terms of any agreement. A high asking price alone will not overcome a buyer’s inability to secure financing.

Looking ahead, 63% of owners expected their business performance to improve over the next year. Among those planning an exit, 27% said current conditions were prompting them to sell sooner, while 14% were delaying their plans. That mix of confidence and caution reinforces the importance of preparing before a business goes on the market.

BizBuySell’s figures draw on roughly 50,000 businesses listed for sale or recently sold, with closed transactions voluntarily reported by brokers. The data provides a useful view of market direction but does not capture every private-business sale. Year-over-year comparisons use revised third-quarter 2025 transaction figures. Readers can examine the underlying figures through the report’s data tables and interactive market information.

For small business owners, the emerging distinction is between having a business available for purchase and having one that can withstand detailed financial examination. As buyers scrutinize more deals and lenders demand stronger evidence, clear records, repeatable operations, and sustainable earnings may do more to attract serious offers than an ambitious asking price.

This article, “Small Business Sales Fall 7% as Median Sale Prices Jump 17%” was first published on Small Business Trends