Shortage Of Good Businesses

With the fallout from the GFC finally beginning to settle, buyers are returning to the market, but leaving empty handed.

As it stands today, there are still not enough good businesses to meet the ever increasing demand from buyers. “Why is this the case?”

The current trends suggest that sellers have been reluctant to put their businesses on the market because valuations have dropped. Valuations, based primarily on trading profits, were strongly affected by the global recession in the 2008-09 financial year. Now however, with business confidence returning and financial indicators pointing to a good recovery in the Australian economy, the majority of business profit and loss statements are still reflecting the image of a far bleaker period; an image no longer indicative of their current value. Valuations under these circumstances, though certainly not incorrect, are more often than not, less than what the seller is looking for. This directly results in potential sellers being forced to to hold on to their business as they wait for profits to re-build.

As in a classic supply and demand scenario, well-performing businesses need not take that path. The ever increasing numbers in the buyers market opens the door for businesses that have performed solidly during the economic downturn.

Good businesses are selling and they are selling extremely well.

The primary hurdle within the business sales sector, until now, has been restoring buyer confidence. With the proper preparation a good business will sell high, and sell fast.

The past 12 months have been exceptionally good for clients of Xcllusive with the sale of several businesses occurring within a matter of weeks from being placed on the market. Good brokers everywhere will tell you similar stories, but the one common theme sung over and over again is that these businesses were priced correctly and adequately prepared for sale. The sellers knew what they were selling and the buyers knew what they were buying. When it comes down to it, if you have a strongly performing business, with the right preparation, you will find a buyer, and you will find them fast. The shortage of good businesses on the market assures it.

-From Xcllusive Newsletter Autumn 2010

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