After successive falls in value in the last two quarters, business owners looking to sell will be pleased to know that prices have stabilised.
Volume up, prices low but steady
The June edition of the BizExchange Index is out this week. After successive falls in value in the last two quarters, business owners looking to sell will be pleased to know that prices have stabilised.
But small business owners in retail and hospitality are still selling at the low end – for less than a year’s earnings.
Good news for the transport sector, where prices returned to previous levels after significant falls in the past two quarters, as margins recovered from pressure from fuel prices.
Another significant trend we found in our research for the Index was that there has been an ongoing decrease in the level of variance of prices in each sector, with an increased consolidation of prices around the mean.
There are a number of factors contributing to this. First, the continued increase in the level of financial disclosure in the market is increasing the proportion of businesses for sale able to be included in the BizExchange Index calculations.
And second, the increased uniformity in the way in which businesses are being presented for sale, by separating property from the business while including stock and equipment.
There were more than 10,000 businesses listed for sale in print and online during the June quarter (an increase of over 25% on the March quarter). The majority of these are small to medium businesses; this is consistent with the distribution of Australian businesses.
Retail and hospitality businesses are over-represented, with retailers making up 42% of print and online listings, and accommodation, cafes and restaurants 27% of print and online listings.
Retail businesses represent just 20% of all businesses and accommodation, cafes and restaurants represent just 3% of all businesses.
There is no significant difference in business values (as a multiple of EBIT) between states in Australia.
Confidence about future values
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Respondents to the BizExchange Index June quarter survey remained moderately confident about future values: 45% expected prices to remain the same, while 26.5% expected them to fall, and 22.5% expected them to rise, 6% were unsure.
By comparison, in the March quarter most expected them to remain steady, while in the December quarter most expected the values to fall. This overall neutral sentiment is supported by the reasonably stable valuations across most of the index this quarter – with variance in valuations reducing to a general consolidation of valuations around the average.
A copy of the full BizExchange Index report is available from the BizExchange website www.bizexchange.com.au
Andrew Kent is a director of BizExchange, an independent marketplace for business for sale or seeking investment. BizExchange has a directory of independent advisers and business brokers and information on valuations.
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