Is this drought a long-term trend, and therefore the death-knell for many regional businesses? Or is it better to view the big dry as an opportunity to buy in at the bottom?
Whether you buy a business or decide to sell, it depends on … the weather. By Andrew Kent.
A millstone or a marvellous opportunity? Well, that depends on your views on the drought. The drought and climate change have brought uncertainty to the regional business marketplace, particularly the agricultural sector.
Some business owners in regional areas see the drought as the start of a longer term trend and want to sell their business. Others, who consider this to be the one-in-one-thousand year event, see this as an opportunity to buy businesses at the bottom of a cycle. Contrasting views of the future like these will always bring volatility to the market.
Farmers are not the only businesses feeling the effects of the drought. Many shearers, contract harvesters, crop spraying contractors, artificial insemination specialists and transport and storage companies are feeling the downturn in agricultural activity and output caused by the drought.
There are also businesses based in rural towns and cities that are experiencing some downturn in demand, such as transport and equipment manufacturers and resellers, fuel outlets, mechanics and local retail outlets.
With the majority of farms for sale being broken up as part of the sale process (land, stock and equipment), the impact of the drought on the value of rural businesses is more easily seen elsewhere.
One example is plant nurseries, where both wholesale and retail are struggling to sell. Depending on your long-term view of climate, this might be an ideal time to buy into the nursery trade. Particularly as there will also be plenty of keen gardeners looking to revitalise their gardens with new plants once the drought breaks.
Tip: If you are looking for an eventual tree change, now is the time to buy that business in the country.
Business for sale:
Long-established South Australian wholesale farm produce and supplies business.
Price: More than $1 million.
Annual net profit: $300,000 plus proprietor’s wages.
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