There has been an enormous amount of media coverage and focus over the last five years about a potential tsunami of New Zealand businesses being put up for sale, due to a wave of baby boomers looking to sell up and enjoy their well-earned retirement. Many have challenged this theory and stated that it’s going to be more of a ripple than a tsunami as the health and motivation of these owners remains strong with no immediate desire to hang up their boots just yet.
LINK is the largest specialised business brokerage company operating in Australasia and has been in the market for just under 30 years.
From LINK’s perspective, based on our results over the last year and looking at the current activity in the market, we would comment that the actual truth is probably that it is a “surfable wave” rather than a ripple or tsunami. Despite this, for the financial year ending 2022, LINK enjoyed its strongest trading year in history and the first half year results for the 23 financial year are also very strong.
The local LINK Bay of Plenty office which operates with a team of 17 industry specialist brokers, has enjoyed a very busy and successful year with a record number of business sale transactions. So, what is driving increased transactional activity in the market right now?
There is no question that we are seeing an increase in the number of baby boomers putting their businesses on the market ready to enjoy retirement. If you are a business owner out there considering a possible exit through a sale, I would strongly recommend that you:
- Start the process of preparing the business for sale
- Engage your professional advisors
- Maximise the business profitability
- Identify and mitigate or minimise risk
- Engage an industry specialised business broker
Selling a business takes time and business owners are encouraged to engage with an expert such as business broker well before they want to sell. A business broker can help in preparing a business for sale and guide the owner through the whole process which can sometimes be rather complicated.
The emphasis and importance on business owners “grooming” their businesses for sale are ever increasing.
As a result of the anticipated influx of businesses coming to the market in the years ahead, this could possibly have a significant dampening impact on business values due to oversupply. Nearly 60% of small to medium-sized businesses are owned by people aged over 50 and 23% are currently owned by people over 60.
As such many owners considering retirement could achieve a much better result by achieving a sale sooner rather than later. It is a sad fact that many owners will miss this window of opportunity and end up winding down a lease only to achieve minimal cents on the dollar for their tangible assets, running a closing down sale to shift stock and making long serving loyal staff redundant.
It’s a fact of life that every single business owner will at some time exit their business. At LINK, we encourage owners to take control of this process and achieve a desirable chunk of tax-free cash through a successful sale.
In addition to more businesses coming to market, much of the increased activity we are experiencing is coming from a strong demand of buyers in the market. Many existing businesses are recognising a good opportunity for growth through a strategic acquisition (especially from those baby boomer business owners retiring).
Business ownership is one of the best ways to build equity, and there is a noticeable generational shift in younger people aspiring to own their own business, rather than relying on climbing the career ladder within an existing company to help secure their future.
There is a real appetite out there for the younger generation to get involved in business which can provide the following benefits.
- A better work life balance
- Increased earning capacity
- Opportunity to build equity and wealth (free from Capital Gains Tax)
- Tax advantages
- Independence (being your own boss and controlling your own destiny)
Many aspiring business owners out there could consider avoiding paying intangible (goodwill) and starting up a business. However, the statistics of failed starts ups is as high as 80% in the first year. Buying an established business as a going concern hugely reduces risk and the revenue is instant.
Whether you are considering selling or buying a business, don’t miss out on the potential opportunity to change your life through the successful sale or purchase of a great business.
Our team of business brokers located here at LINK Bay of Plenty have been operating for over a decade and have successfully transacted well over a thousand business sales.
When considering the sale or purchase of a business we encourage you to reach out to us for a friendly, no obligation, confidential chat.