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Tabak Business Sales Market Update - February 2018

Will 2018 be your year?

2017 was a very busy year for us here at Tabak Business Sales and we expect 2018 to be even more so.  But, I have to admit that there was a slow patch – thanks to the election.  It was quite noticeable and we have seen that in some instances there was a marked drop in sales post the election.  Some commentary in the media is still referring to that period (for example the ANZ Business Confidence Report for the December Quarter) as the current mood in the market.  I personally think things have moved on.

Retail sales pre-Christmas were up by around 4% on the year prior.  The country achieved records in both imports and exports last year.  And, the business community has now got some certainty in regards to the labour law reforms.

Due to lower than expected inflation, it looks like interest rates are going to remain fairly static over the next year.  This means that money will remain “cheap” for the foreseeable future.

But, I expect inflation to creep up.  Wages are set to increase and we are seeing a slightly softer dollar. 

From a business sales perspective – we noted a “wait and see” attitude.  This is now well and truly over and I had to cut my holiday short to deal with the workload.  What a great first world problem to have!

Here are some other themes we noticed over the last year:

Limited number of quality businesses on the market.
Buyers often tell us how few businesses there are for sale that are actually worth looking at.  Whilst a quick glance at Trade Me would suggest the market is awash with businesses for sale, in reality, most of these are producing minimal returns. 

More focus on projections rather than historic profits.
We are tending to sell businesses with much more emphasis on the future than we have previously.  For us, it is very rare to see a business where profits have not grown steadily over the last few years. It follows that the logical focus should be mostly on what is being achieved in today's market, rather than what was achieved even two years ago.

More competition.
Many of our buyers tell us that they have “missed out” on too many great opportunities and do not want to repeat this. They are realising that they need to act quickly in order to get the business they want.

What does this all mean for business buyers?
The above, without question, should signal to serious buyers to actively pursue good business opportunities.  Remember that there are two costs to buying a business.  1) the price you pay for the business and 2) the cost of finance!

 

At Tabak Business Sales, we focus on connecting serious buyers with quality businesses. As always, we look forward to hearing from you.

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