Market attention needs to be converted to sales

There are a lot of businesses for sale – and whoever buys will shape the make-up of the next generation of entrepreneurs.

Market attention needs to be converted to sales

The level of interest in Australia’s private business market is definitely growing. An indication of this is that BizExchange, a website for advertising business sales, had a 20% increase in visitors in January.

The issue for the market is whether this increase in attention can be converted into actual business sales.

It is not surprising that so many business owners are contemplating an exit. The business environment of the last decade is no more, and no one is quite sure what lies ahead. Included in the mix are interest rate rises, talk of local inflation and US recession, floods in parts of Australia and ongoing drought elsewhere and a new Federal Government. Even seasoned economists are struggling to predict the future.

Whether the increased activity is from those looking for an exit, or a next generation of business owners interested in a purchase, is yet to be seen.

If it is the next generation of business owners, this is a great sign for the country.

Buying an appropriate business has a far greater probability of success than building one from scratch. Current business prices are such that the earnings are generally in excess of 25% of the purchase price, leaving a healthy profit after interest payments. This is of course assuming the earnings and interest rates continue at similar levels.

With few private companies directly involved in the energy, finance or resource sectors, many of the headline stories will not affect them.

The judgement call that needs to be made by potential business owners is how much the business they are interested in is likely to be affected by external factors, and how they as individuals are going to make the most of these circumstances.

This is a business landscape ready for the arrival of the next generation of entrepreneurs. The question is are they ready to step up, and can they get the finance?

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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