With businesses closing their doors around Australia due to Government enforced lockdowns, there are businesses that are thriving. Supermarket chains are struggling to keep up with demands, food manufacturers are running 24/7 factories, farmers are busy harvesting crops and the medical supply businesses are running to capacity.
We are seeing some great innovations coming out of small businesses from Gin Distilleries making hand sanitizers to Restaurants creating ‘heat at home meals’. Whilst some businesses are innovating to stay afloat, some are entering ‘hibernation’ and some are thriving.
So we decided to ask the experts at the frontline - what are some industries to keep an eye on.
What are good industries to invest in at the moment?
Blair: In these times the industries that are hot are plain for all to see eg. Medical, transport and delivery,retail/wholesale food and it is unlikely these businesses would be placed on the market for sale. However, there are some fundamentally good businesses out there that are feeling the effects of COVID-19 and should be considered as a worthwhile opportunity. COVID-19 will not affect our lifestyles forever, at some stage the world will need to move forward regardless of its progress.
Jeff: Businesses within the ‘service industry’, some ‘retail’ and wholesale businesses. Examples: mechanical, crash repairs, engineering/manufacturing, office consumables - (given that many will be working from home), some e-commerce businesses, bottle shops/pubs with drive thru’s, supermarkets and takeaway businesses. (It was reassuring to see the guys at my local pizza bar last night wearing face masks and gloves. Well done ‘Euro Pizza and Restaurant’ at Wattle Park - Adelaide). I think all businesses should show their customers that they are doing everything possible to stop the spread of this virus and from a consumers point of view, this gives us great comfort.
Davie: Industries that the government deems "essential" - freight/logistics, supermarkets/food, pharmacies/health care, manufacturing or 3D printing, big data and tech are seeing huge benefits
What's your thoughts on the hospitality industry and buying a cafe or restaurant that is currently closed?
Jeff: These will be difficult to sell for the time being. However, once we can start to see some ‘blue sky’, I would hope that many of the well-established eateries will ‘bounce back’.
Jack: Things move slowly in Australia. Lifestyle is unlikely to be significantly different after the crisis so are the businesses that live on it. Hospitality and retail businesses that survive the pandemic will still hold enough market shares for buyers to consider investing into.
Davie: The lockdowns and the pandemic aren't forever. So you have to consider that there will eventually be a bounceback. Having said so, the biggest question is a matter of when. So when looking to purchase a business in the hospitality business, you have to be comfortable with the uncertainty that you may not be able to operate until much later.
Do you have any tips for people looking to expand into other industries in the future?
Jeff: Research the industries well and seek sound commercial advice.
Jack: E-commerce and businesses with stronger online capacity will get bigger but there are some lifestyles deeply rooted, like the beaches and neighborhood cafes for the Aussies and the bubble teas for the Chinese. It won’t easily change despite the crisis. So there is no rush to expand into novel industries.
Davie: Nothing really changes in business investment fundamentals - do your due diligence. Check the financials and assess the business value against the sale price. What's also equally important is that you're not caught up in the pandemic and investing in an industry that you otherwise wouldn't normally invest in. This pandemic will end and you have to consider whether it's a wise business opportunity in 'normal' economic conditions.
What if you are currently in the process of buying a business?
Blair: As a prospective buyer what do you do now? Do you wait until the world is back to normal and then be in competition with others or do you undertake this time to investigate opportunities and pounce early? An astute buyer will start investigating opportunities!
Example: There are always two sides of an equation. Let’s say a seller of Café, owned for a number of years been very profitable for the owner and are handling the business well during current conditions. The owner has made great money and doesn’t need to hold out for that “Ideal” price. The owner has other non-business related matters which is motivating them to sell. A buyer knows the business well and understands it is essentially a great business and would love to be its next owner. They are ready to move forward. So, what does both parties do? Listen to their advisors, which the advice will be likely heavily weighted on the conservative side! Or, they could come to a mutually beneficial outcome whereby the seller assigns the responsibility of the lease and day to day running of the business receiving a lower up front. The buyer purchases the business for below market and secures a fundamentally strong business. The deal could also be structured, where the seller will receive a second future payment, once performance criteria is achieved and business is returning to normal.
There are many positives:
• Seller is free of responsibilities and can address personal matters
• Buyer has secured business at lower that market price
• Seller receives future payment when conditions return to normal
• Buyer has secured their future from a fundamentally great business
There are always ways to get a deal done, reasonably.
Blair Luckman, Co-Director of LINK Business Brisbane
Blair has considerable business experience in various sales and management roles and in finance and business development generally, both locally and in the UK
You can find Blair on Linkedin
Jeff Romanowski - Founding Director of Adelaide Business Sales
Jeff has over 33 years experience in the specialised field of Business Broking. Jeff has a genuine interest in people and helping them to achieve what they have set out to do, whether that's selling or buying a business.
You can find Jeff on Linkedin
Jack is a specialist business broker working with Chinese investors. With 20 years of diverse experience in working for corporations and owning small businesses. Jack has a solid understanding of Asian and western cultures.
You can find Jack on Linkedin
Davie Mach - Director of Box Advisory Services
Davie has over 10 years of experience in advising businesses in management accounting and taxation issues. He leads a passionate team who are dedicated to offering proactive and outstanding service to their clients.
You can find Dave on Linkedin
Buying a business at the moment will give you many advantages. Whilst some businesses may be seeing a downturn due to forces closures or lost sales, there are opportunities out there and good investments to be made in the long-term. Its important in these uncertain times to be consulting with a business broker, accountant and financial planner so are well informed when making a decision.
Be sure to check out these industries and opportunities:
Best wishes to all business owners, stay safe and healthy.