How business sales are tracking in 2022

What is happening with business sales in New Zealand right now? Neil Barker says demand for profitable businesses continues
to remain extremely high and the outlook is positive.

Businesses across the wholesale, childcare, home-based, manufacturing, import, building, contracting, service and transport sectors continue to be highly popular and keenly sought after, he says.

“After two years of Government lockdowns and negative business policy, a very high percentage of businesses have come through continuing to make good profits.

“Yes, tourism, tourist towns and any business relying on overseas visitors have been hard hit. But on the positive side, there are many more businesses that are making better bottom-lines than ever,” he says.

“We believe that the better bottom-line is being fueled by Kiwis not travelling overseas and choosing to spend their hard-earned money on items such as household goods, renovations, vehicles, boats etcetera. In other words, spending money in New Zealand rather than overseas.”

Many Kiwis have returned from overseas, which has also contributed to pushing up the demand for good profitable businesses, adds Neil. “Demand to buy businesses has never been greater in the past ten years.”

Barker Business Brokerage has recently sold a range of general businesses in the $3m to $30m price bracket, he says. “The demand for these businesses is very strong. In fact, we have buyers for businesses from $200,000 up to $500 million.”

With border restrictions lifting, the outlook for 2022 is optimistic, says Neil. And his team has noticed three clear trends:

• The majority of business owner clients, prospective clients and contacts have rebounded from their past bad year-end results significantly over the past six months. Some clients in the tourism sector have witnessed a resurgence in bookings from domestic travellers.
• After Covid, numerous owners are risk averse and sensing that 2022 is a suitable time to sell their business, due to operational challenges and pandemic burnout. They want to retire and enjoy the fruits of their hard labour.
• With less opportunity for international buyers of companies, and Kiwi companies not being able to easily grow overseas, there is a strong appetite from large local companies to buy revenue and earnings through acquisition.

“We are experiencing a huge demand for good businesses, and selling many small businesses as well as businesses in the $5m to $50m price bracket,” says Neil. “With our excellent marketing program and brokers expertise, we are often experiencing multi-offers which ensures that you are receiving the best possible price on today’s market.

Maximising sales value

“As specialist business brokers we are constantly asked to maximise a client’s sales value,” says Neil. “It is a fair request and one that can be worked on years before the business is actively marketed. We have a number of ways which can be used to optimise value, but one of the most overlooked is in the accounts of a business.

“Most businesses are value based on a multiple of their profits and demonstrating more profit will lead to more money when the business sells,” he says.

“One way to demonstrate more profit, that many business owners overlook, is normalising your profits. This means taking certain incomes and expenses out of the profit and loss statement to give a more accurate picture of the business operating costs. It is certainly worth taking the time to do this because it can add thousands to the final value of your business.”

Bringing in the experts 

Normalising accounts is an area where it can be good to get expert help, from your accountant or specialist business broker, explains Neil.

“Business brokers regularly help businesses 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 filed away.

“Considering how much each of these add-backs can add to your bottom line, reaching out for help to maximise your profits is a great investment,” he says. “Take the time to maximise your adjusted EBPITDA at the start of the process to ensure any offer truly reflects the value of the business.

Neil Barker is managing director of Barker Business Brokerage. If you are considering selling your business contact one of their Business Sales Specialists for a free no obligation appraisal or ask for a copy of their “Complete Client Guide” brochure.