Kenny Rogers’ lyrics from his famous Gambler song “You’ve gotta know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run” is a great analogy to choosing the right time to exit your business.
You see, like many industries, business sales are cyclic, and our market can quickly fluctuate, generally driven by the supply and demand of buyers and the business opportunities on the market.
Despite the unrest of Covid-19, Australia wide buyer enquiry rates have increased dramatically. Perhaps this is due to a combination of job insecurity, all time low interest rates, buyers wanting to be their own boss, or the high returns on investment they generally achieve.
For a business broker, knowing there is an abundance of buyers is fantastic, however, the problem we currently have is we only have around 25% of our normal stock holdings.
This suggests business owners are hanging on, likely as they are concerned, they may not achieve a favorable price/terms if they sell now. For many business owners this could not be further from reality, whilst so many buyers are sitting on the side lines, eager to invest.
Recently the Australian Government unveiled a very sobering picture of record deficits that are predicted to only worsen. The outlook forecasts the unemployment rate will peak at 9.25 per cent by December and the budget deficit will reach a whopping $185 billion or 9.7 per cent of GDP. This staggering figure is the largest deficit since World War II.
The Australian economy is forecasted to contract by 3.75 per cent in 2020 before rising 2.5 per cent in 2021. This will force many business owners to sell or possibly walk away from their enterprises.
Considering baby boomers collectively own the largest percentage of operating businesses and 70% of them will have to retire in the next 15 years, our cycle is about to turn, and without doubt we will see a wave of businesses flood the market.
The difference in the sale price and conditions for business owners exiting in a sellers’ market, compared to a sale in an overcrowded buyers’ market could be extreme.
Those in the know will agree that for many baby boomers, the risk to holding on to their business is simply not worth the gamble.
So, if you are considering selling, perhaps now is the time to “know when to run”.
Please don’t hesitate to contact the Team at Queensland Business Sales if you would like to discuss the above in greater detail.
Principal / Certified Practising Business Broker
Queensland Business Sales