Business Sales Steady as AI, Rising Costs Reshape 2026 Deal Market

The U.S. market for buying and selling small businesses entered 2025 with plenty of uncertainty and ended the year on more stable footing, even as buyers became more selective and dealmaking grew more complex. New data from BizBuySell’s latest Insight Report shows a market that has found its balance after years of disruption, with steady pricing, a broader buyer pool, and clearer signals about what makes a business attractive in 2026.

For small business owners, whether they are considering an exit, evaluating acquisition opportunities, or simply trying to understand where valuations are heading, the findings offer a detailed snapshot of how inflation, artificial intelligence, private equity, and policy uncertainty are reshaping the landscape. The full report is available directly from BizBuySell and it provides one of the most comprehensive looks at Main Street transactions in the U.S.

Overall, the market stabilized in 2025. Total enterprise value of businesses sold reached $7.95 billion, up 3% from 2024, while transaction volume remained essentially flat. Sale prices increased modestly, with the median sale price rising 2% year over year to $350,000. Median cash flow and median revenue also grew, climbing 3% to $158,950 and $703,000, respectively. These figures suggest that, despite economic headwinds, many businesses continued to perform well enough to support stable or slightly higher valuations.

That stability, however, masked significant volatility throughout the year. Transactions dipped 1% in the first quarter and fell another 4% in the second quarter as inflationary pressures intensified and buyers grew cautious. Activity rebounded sharply in the third quarter, with transactions jumping 8% as some owners decided to sell sooner rather than risk future valuation declines. The momentum slowed again in the fourth quarter, when a government shutdown disrupted lending activity, particularly for SBA-backed acquisitions.

“The government shut down hampered closing deals in 2025, and they rolled to 2026,” said Edward Bell of Sunbelt Business Brokers in Florida.

For small business owners watching the market from the sidelines, this pattern underscores how external events can influence timing even when underlying demand remains intact. It also highlights why preparation and flexibility matter more than trying to predict the “perfect” moment to sell or buy.

Cost pressures emerged as one of the clearest dividing lines in the market. Rising labor, rent, and supply costs squeezed margins across many sectors, but not all businesses were affected equally. Companies that could pass costs on to customers or operate with differentiated offerings tended to maintain stronger valuations, while others struggled.

“Higher costs for labor, rent, and supplies have squeezed margins, which can often reduce valuations when those increases aren’t well managed. However, businesses that can pass on those costs to customers to maintain reasonable margins are still seeing strong valuations,” said Dave McGill of Murphy Business Sales- Utah.

This divergence has created what many brokers describe as a more balanced but selective market. About 34% of brokers say conditions favor buyers, another 34% say they favor sellers, and 27% view the market as balanced. That split reflects a reality where high-quality businesses still attract strong interest, while weaker or poorly documented operations face more scrutiny.

“Buyers remain active, but they are more cautious and deliberate due to factors such as inflation, tariffs, and immigration related concerns. This has led to more thorough diligence, increased scrutiny of forward-looking assumptions, and a stronger emphasis on risk allocation in deal structure,” according to Jason Ward of TruView Business Advisors.

For sellers, this means that solid fundamentals alone may no longer be enough. Buyers are digging deeper into financials, operations, and future risks, and deals are taking longer to close. At the same time, brokers caution against assuming that caution equals inactivity. Well-run businesses with clean records continue to draw immediate interest and, in some cases, multiple offers.

One of the most notable shifts in 2025 was the continued expansion of the buyer pool. Private equity firms, search funds, and a growing group of so-called “corporate refugees” are all competing for Main Street businesses, particularly those with strong cash flow and growth potential.

Nearly half of brokers surveyed, 44%, reported an increase in private equity activity. Much of that interest comes through direct acquisitions or roll-up strategies, where firms acquire multiple small businesses within the same industry. While private equity brings capital and professionalized processes, it also introduces complexity. Almost half of brokers, 49%, said private equity buyers tend to be more demanding or introduce more complicated deal structures, and only 12% said these buyers move faster than individuals.

“The PE firms are slow in their valuation and quite deliberate with the information and how they control the process. My experiences with direct buyers have been much more positive and even flowing through the deal process,” said David Strejeck of Sumtis Business Advisors in Pennsylvania.

Business owners themselves are divided on private equity. While interest is strong, with 20% of owners reporting being approached about selling and nearly 46% receiving multiple inquiries per year, enthusiasm is limited. Only 14% of owners say they would definitely sell to a private equity firm. Thirty-eight percent are unlikely or unwilling, and 32% view private equity ownership as negative for the small business market, often citing concerns about culture, debt, and long-term stability.

“With the way private equity operates currently, it would be unethical to sell my business to a PE firm for them to strip it for parts and sell the pieces,” said Chaz Forster, owner of Metronaut Studios in Texas.

Alongside private equity, search funds are playing a growing role. These buyers, often MBA graduates pursuing Entrepreneurship Through Acquisition, are increasingly active. Forty-three percent of brokers reported increased activity from these business-school-trained buyers. Brokers generally describe them as analytical and well-capitalized, though sometimes lacking hands-on operating experience.

“Many of our buy side clients are ETA searchers. We love working with these buyers generally, however, it takes more handholding. And it’s not meant for everyone who starts down the road,” said Max Friar of Calder Capital in Michigan.

Adding even more competition is a surge of corporate refugees, mid-career professionals leaving traditional employment to buy small businesses. According to the report, 44% of buyers now identify as corporate refugees, with another 15% reporting recent unemployment. This influx has intensified competition for the same high-quality listings sought by private equity firms and search funds, further driving up expectations around diligence and deal readiness.

Artificial intelligence is another force reshaping buyer behavior and valuation discussions. For some aspiring owners, AI has become a push factor. Twenty-eight percent of corporate refugees said concerns about AI replacing jobs influenced their decision to pursue business ownership, with 6% calling it a major factor.

“Companies are integrating AI quickly, sometimes recklessly, and I believe many roles, even senior leadership, will be replaced. I want income streams that don’t have a direct line of sight to being automated,” said one buyer.

At the same time, AI adoption is increasingly viewed as a value enhancer. One-third of buyers, 33%, said they see businesses that have adopted AI as more valuable, associating technology-enabled operations with scalability and resilience.

“If the business hasn’t started implementing ANY AI enhancements, I would be concerned about any existing staff being able to implement and/or adapt to AI,” another buyer shared.

Interestingly, some buyers view the absence of AI as an opportunity rather than a weakness.

“Financials are what they are. I’d prefer to see financials work where I see an opportunity for AI not currently being used. This is immediate growth potential that can improve margins or increase revenue on a tight deal,” another buyer said.

Among existing owners, AI adoption is already widespread. Sixty-five percent report using AI in their operations, most commonly in marketing, analytics, search, and customer service. Eighty-three percent say AI has improved performance, and 10% report reducing employee roles since adopting it. For small business owners considering a sale, these figures suggest that AI strategy is becoming a standard part of how buyers assess future potential, not just a nice-to-have feature.

Sector performance in 2025 reflected a broader K-shaped economy, where some industries continued to thrive while others struggled. Service businesses stood out as the strongest performers. Transaction volume in the service sector rose 4%, and the median sale price increased 5% to $340,000. Average cash flow multiples also increased, even as margins tightened due to rising costs.

Several service subsectors posted particularly strong gains. Financial services transactions jumped 38%, with median sale prices up 40% and median cash flow up 15%. Technology services saw a 12% increase in transactions and solid gains in pricing and cash flow. Architectural and engineering firms also performed well, with transaction volume up 17% and significant increases in sale prices and cash flow.

“Businesses that can pass along costs to customers to maintain reasonable margins are still seeing strong valuations. As a result, companies with unique products or services are often less impacted by price increases and, therefore, by inflation and can still command premium pricing.” Said Dave McGill of Murphy Business Sales- Utah.

Retail presented a more mixed picture. Overall transactions were flat, and median sale prices fell 2% to $250,000. Cash flow declined slightly, and revenue remained flat, reflecting ongoing pressure from higher costs and shifting consumer behavior. Yet within retail, niche and community-oriented businesses continued to attract buyers. Cafes and coffee retailers saw transaction volume increase 5%, with strong gains in pricing and cash flow. Bike shops experienced fewer transactions but much higher sale prices and cash flow, suggesting that well-positioned niche retailers can still command premiums.

Restaurants faced another challenging year. Rising food costs, labor issues, and changes in consumer spending squeezed margins, leading buyers to be more selective. Transaction volume declined 5%, though median prices held steady and revenue increased, indicating that buyers focused on operations with strong sales and loyal customers.

“I focus exclusively on restaurant transactions. The restaurant sector was hit particularly hard in 2025 due to inflation and reduced consumer disposable income. As a result, business sales declined, and sellers were forced to adjust their asking prices,” said Andrea Dangio of Restaurant Realty in California.

Manufacturing lagged behind other sectors, with transactions down 11%. Tariffs, supply chain disruptions, and economic uncertainty weighed heavily on valuations. Median sale prices fell 7%, and both cash flow and revenue declined. Still, brokers emphasized that performance varied widely within the sector.

“It’s a mixed bag. We’ve seen a lot of manufacturing distress in the Midwest. Tariffs, the EV market, etc. have caused some chaos. However, there are many very strong companies,” said Max Friar of Calder Capital.

Inflation, tariffs, and federal policy remain central concerns for owners planning for 2026. Seventy-eight percent of owners reported rising expenses, driven by higher costs for goods, insurance, marketing, and energy. More than half have raised prices to offset these pressures, though many worry about customer resistance. Labor challenges compound the issue, with 45% reporting difficulty hiring or retaining employees.

“The cost of literally everything has gone up in 2025. Fortunately, we’ve been able to keep our profit margins in check with price increases that so far have not negatively impacted our top-line sales volume,” said Derick Holmes, owner of Lumos Architectural Lighting in Colorado.

Tariffs and trade policies have prompted some owners to delay purchases or seek domestic suppliers, while others have found competitive advantages.

“The tariffs have re introduced many customers to U.S. made products. The BABAA (Build America, Buy America Act) policies put in place with The President have helped us because we already manufacture domestically. We design, fabricate, and assemble all of our products in Denver, sourcing every component in the U.S. Tariffs have leveled the playing field for us against much of our competition,” said Holmes.

Sentiment toward the The President administration’s policies is divided. Forty-nine percent of owners feel more optimistic about the business environment, while 33% feel less optimistic. Views on whether campaign promises to small businesses are being delivered are evenly split, underscoring the uncertainty shaping planning decisions.

Looking ahead, brokers are largely optimistic about 2026. Sixty-one percent expect stronger buyer demand, and 72% anticipate more sellers entering the market, driven in part by Baby Boomer retirements. Nearly half report that Boomers already make up the majority of their listings, and 80% forecast higher deal volume in the coming months.

“We expect deal volume to increase meaningfully as more owners consider exiting earlier due to the growing impact of AI, and as buyer demand accelerates with entrepreneurship-through-acquisition continuing to scale across business schools, media, and social channels,” said Jason Ward of TruView Business Advisors.

For small business owners, the message is consistent across the data and commentary. Strong businesses continue to find buyers, but preparation, adaptability, and clarity around costs, technology, and operations are increasingly critical. As competition intensifies and diligence deepens, those who invest early in readiness are better positioned to navigate whatever the market delivers next.

This article, "Business Sales Steady as AI, Rising Costs Reshape 2026 Deal Market" was first published on Small Business Trends

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