What A Difference A Year Makes: Prepare Your Business Now

by Xcllusive Business Sales 28th of February, 2022
What A Difference A Year Makes: Prepare Your Business Now

Business buyers in 2021 have been more optimistic when searching for and buying businesses than they were in 2020.

In Xcllusive's 2020 State of Business Sales Market Report, 34.1% of participants who responded to its buyer confidence survey indicated that they were on the sidelines watching and waiting, with 32.6% seeing opportunities in the current "New Normal" environment.

By 2021, 42.5% already see opportunities in the current environment while 39.6% are cautious but considering less affected businesses. Only 11.3% remain on the sidelines, signalling buyers' confident return to actively engaging in the business sales market.

This is further indicated by how keen buyers are now to be on the market for longer than 12 months (55.7%) compared to last year (34.8%). In addition, 49.1% now foresee a reasonably fast recovery compared to last year where half of the survey participants foresaw a slow recovery. Even in the current environment of curtailed economic activity, serious buyers are out there looking for good businesses to buy.

Why Buyers Are Looking

Xcllusive's 2021 State of Business Sales Market Report shows that buyers' main consideration in searching for good businesses to buy is still for investment (at 35.8%, up by 4% from 2020). Compared to last year, though, where the second topmost reason given was to change lifestyles (30.3%), this year it's to expand their current businesses (30.2%) -- again signifying a more gung ho take on the market.

Where three-quarters (76.3%) of buyers last year expected prices to be significantly reduced, only less than half (43.4%) this year expect it to be so, indicating an expectation of increased business values as well as market competition.

In both years, two-thirds (64.1% in 2020, 65.1% in 2021) of buyers indicated that they would be willing to buy a percentage of a good business now with an option to buy when the pandemic situation is resolved later.

 

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What Makes the Difference?

Three possible reasons could be causing the difference in business buyers' outlook: increased vaccination of the population, government financial aid, and economic prospects.

  1. Increased vaccination of the population. As of November 15, 2021, around 70% of Australia's population has already been fully vaccinated, while 6.4% has been partly vaccinated. With close to three-fourths of the population vaccinated, there is an increased likelihood of more health protection for more people, and therefore, increased confidence of opening up the economy as well. When economies open, there is more business activity, so prospects for future increases in business values and returns on investment are looking up.
  2. Government financial aid. There are several Australian government financial assistance programs for businesses in the following industries: accommodation and food services, administration and support services, agriculture, arts and recreation, construction; professional, scientific, and technology services; rental, hiring, and real estate services; tourism, and transport, postal, and warehouse services. Government support range from support payments, fee waivers, and rebates, to funding through loans and outright grants. With government assistance, businesses in these industries are particularly attractive to buyers who are also looking for good businesses that can more easily transition into the "New Normal".
  3. Economic prospects. As of May 2021, the Australian economy is forecasted to grow by 5.1% in 2021 and 3.4% in 2022, driven by domestic demand, with labor demand strong and consumer confidence high. Rising incomes and declining saving rates will fuel consumption, and unemployment rates will further decline. These, in addition to current low-interest rates, support business buyers' optimism and robustness in looking for good businesses to buy, in preparation for meeting the incoming tides of anticipated prosperous times when they come.

So, if you're a business owner considering selling your company soon or soon as an exit strategy, now is a good time to learn about the market so you will be prepared when you finally decide to sell your enterprise.



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