Covid-19 - Update from Our Business Brokers

As we come into May, there is a little more hope and positivity in the air. Fortunately, Western Australia has been able to flatten the curve and restrictions are beginning to relax a little. This positive news is especially welcome for small businesses. Since the beginning of May, our business brokers have all experienced a sharp increase in buyer enquiries across all portals, which is an excellent sign that things are returning to normal.

Interestingly and perhaps surprisingly, our business brokers have seen pretty consistent demand across all industries. However, buyers are understandably seeking to minimise their risk. Businesses which are predicted to be especially popular include those featuring products or services for which there is an inelastic demand curve or recurring customers / revenue. Examples include:

• Non-discretionary manufacturing / wholesale (cleaning products, essential foods);
• Non-discretionary retail (supermarkets, liquor stores, petrol stations);
• Essential services (medical, mental health, aged care, education, security).
• Financial services (accounting, insurance, financial planning);
• Maintenance businesses as consumers / businesses look to repair cars, plant and equipment rather than make large new capital purchases;
• Growing industries (online retail, technology);
• Work from home businesses.

The industries most likely to experience a decrease in demand include:

• Travel, accommodation and tourist businesses – with the exception of private charter aviation, which has seen a sharp increase in demand for private jet charter hire;
• Higher priced discretionary retail businesses;
• Upmarket restaurants;
• Wholesalers / manufacturers of discretionary goods.

The increase in unemployment may also positively impact business sales. Business Broker Alex Stajka says, “Some buyers are looking to buy a job so to speak. They want to be their own boss and earn enough to pay themselves a decent salary. As such, owner operator businesses generating decent profit are likely to increase in demand”.

If you are considering selling, you may wish to take the opportunity of the current slower than usual pace to prepare your business for sale. Read our short guide on how to prepare a business for sale here, which outlines key areas of focus to get your housekeeping and documents in order.

It is important to have a clear record of how COVID-19 has impacted your business. Business broker Alex Stajka says, “The key here is to think like a buyer. What would someone who wishes to buy a business need to know about this period of unusual trading?”

It makes sense to keep track of:

• Any periods of closure or reduced trading hours;
• Any significant changes to your usual business model / operations – for example, a café switching to 100% takeaway sales;
• Any additional capital outlays / expenses incurred due to COVID – for example, a retail store may have one-off web development costs to enable eCommerce sales;
• New opportunities / revenue verticals introduced from pivoting – for example, a restaurant which previously did not offer home delivery which now has the processes and functionality in place for UberEats. Revenue from this income stream can continue post COVID;
• Any Government relief received – for example, JobKeeper payments received for employees, apprentice and trainee subsidies, instant asset write offs, cash flow boosts, tax reliefs etc.

Realistic valuations and structuring of sales are key in an environment such as now. Working with a business broker who understands their importance is critical.

Speak to a SOT business broker today for a free, no obligation appraisal to determine an estimated sale price.

We can’t predict what will happen next however we continue to work hard on behalf of our clients to get their businesses sold for the best price in the shortest amount of time possible. We are well placed to continue business operations and deal with enquiries online and by phone.

Get in touch now to discuss your options further.