SMEs Still Selling For Top Dollar

Despite the challenges facing small & medium sized businesses (SMEs) in these Covid-uncertain times, many SMEs listing for sale right now are achieving ‘higher than asking price’ results.

Tony Walker recently sold his small beauty business, Little Loft, in Hamilton and was incredibly surprised at the result.

“Within a couple of weeks of listing the business through a broker we had a multi-offer situation in front of us and the final price more than exceeded our initial expectations – by a very long way,” says Walker.

ABC Business Sales – New Zealand’s industry leader in SME sales - says this unexpected sellers-market with examples of vendors receiving more than 30% over the original asking price is being driven by brokers being able to generate interest from multiple-buyers on listings.

“There are still many more buyers looking for a small-medium sized business than there are sellers in the market,” says ABC Business managing director, Chris Small.

“Given the extreme uncertainty SME businesses are experiencing, it’s not surprising that many owners who planned to sell their business are holding off listing it for sale due to thinking they may not maximise the value of their business in this environment.

“In fact, the opposite is the case.”

And it is happening across a variety of sectors. Another recent, successful multi-offer scenario for ABC Business Sales was an Auckland based business providing refrigeration control systems for food storage. In that instance the broker had three offers on the table and the business was on the market for just 11 days, returning a final sales figure more than 10% above the asking price. A further example was a business based on wastewater collection and disposal services around the Wairarapa that generated four offers of up to 6 % above the original asking price in less than a month of being on the market.

Cont’d/…

Small says although it is basic demand exceeding supply that’s generating these high sales prices, the reason there are still many active investors wanting to buy SMEs right now is because the return on investment stacks up.

“The yields generated from business ownership sits in the range of 20% - 30% which is materially above any other asset class including term deposits (1% - 2%), property yields (5% - 6%) and dividends from listed shares (3% - 4%).

“Banks are also being encouraged to lend into the business community. A rule of thumb for business lending is the bank will put in 50% of the total sales price.

“That’s why the message to business owners thinking of selling, is that the demand is definitely there right now for the right businesses and we have buyers ready and waiting.” says Small.

Little Loft’s previous owner certainly agrees and is delighted he made the decision to test the market.

“I didn’t have the time or inclination for the stress involved trying to sell the business privately. I engaged our broker with minimal expectations to be fair, and was more than pleasantly surprised at results,” says Walker.

If you’re a business owner who’s thinking about selling, I’d give it a crack for sure.”

About ABC Business Sales:

ABC Business Sales has been connecting business people to opportunities since 1986. We have unparalleled knowledge across a wide range of business categories and understand the dynamics that make a business successful. With more than 70 brokers and nearly 50 different business categories we are helping business people achieve their success through our specialisation.

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