What is currently happening with commercial sales in New Zealand? Neil Barker says demand for profitable businesses remains extremely high and the outlook is positive.
Businesses in the wholesale, child care, home care, manufacturing, importing, construction, contracting, service and transportation industries continue to be popular and highly sought after, he says.
“After two years of government shutdowns and negative trade policy, a very high percentage of businesses have managed to continue making good profits.
“Yes, tourism, tourist towns and any business dependent on foreign visitors have been hit hard. But on the positive side, there are many more companies doing better than ever,” he says.
“We believe the best results are fueled by Kiwis not traveling overseas and choosing to spend their hard-earned money on items such as household items, renovations, vehicles, boats, etc. In other words, spending money in New Zealand rather than overseas.
Many Kiwis have returned from abroad, which has also helped increase the demand for good profitable businesses, adds Neil. “Business buying demand has never been stronger in the last ten years.”
Barker Business Brokerage recently sold a range of general business in the $3 million to $30 million price range, he says. “The demand for these companies is very strong. In fact, we have buyers for companies between $200,000 and $500 million.
With border restrictions lifted, the outlook for 2022 is optimistic, says Neil. And his team noticed three clear trends:
- The majority of business owner customers, prospects and contacts have rebounded from their past poor year-end results significantly over the past six months. Some tourism customers have seen an upsurge in domestic traveler bookings.
- After Covid, many owners are risk averse and feel 2022 is a good time to sell their business, due to operational challenges and pandemic burnout. They want to retire and enjoy the fruits of their hard work.
- With fewer opportunities for international business buyers and Kiwi businesses unable to easily expand overseas, large local companies are keen to buy revenue and profits through acquisitions.
“We are seeing huge demand for good businesses and are selling a lot of small businesses as well as businesses in the $5-50 million price range,” says Neil. “Thanks to our excellent marketing program and the expertise of our brokers, we often experience multiple offers, which ensures that you receive the best possible price in today’s market.
Maximize sales value
“As specialized business brokers, we are constantly asked to maximize the value of a client’s sales,” explains Neil. “It’s a fair request and one that can be worked on years before the business is actively marketed. We have a number of ways that can be used to maximize value, but one of the most overlooked is in the company accounts.
“Most businesses value based on a multiple of their earnings and demonstrating that more earnings will mean more money when the business sells,” he says.
“One way to demonstrate more profit, which many business owners overlook, is to normalize your profits. This means removing certain income and expenses from the income statement to give a more accurate picture of the costs of running the business. It’s definitely worth taking the time to do, as it can add thousands of dollars to the end value of your business.”
Bring in the experts
Account standardization is one area where it can be good to get expert help, from your accountant or specialist business broker, says Neil.
“Business brokers regularly help companies with this task and know where to look to find adjustments. For example, a broker will look in your “other expenses”, where miscellaneous expenses that can be added to your EBPITDA are often listed.
“Given what each of these additions can add to your bottom line, asking for help maximizing your profits is a great investment,” he says. “Take the time to maximize your adjusted EBPITDA early in the process to ensure that any offer truly reflects business value.
Neil Barker is Managing Director of Barker Business Brokerage. If you’re considering selling your business, contact one of their Business Sales Specialists for a free, no-obligation assessment or request a copy of their “Complete Customer Guide” brochure.