After the global financial crisis and with the upsurge of new technology, which industries are predicted to survive and what can business owners do to sustain profitability? How can business owners sell their own businesses in this turbulent market?
To answer these questions and offer key advice for business owners with small businesses for sale, or those looking to invest in a business for sale, is Graham O’Hehir from Goodwin Mitchell O’Hehir & Associates based in Perth.
Graham specialises in business valuation methods and is often asked for advice on how to value a business as well as working as a professional business broker.
How to value a business realistically
Some business owners have an unrealistic expectation of how much their business is worth; “they want a price for their business because they feel it’s owed to them or that’s how much money they’ve put into it,” but as Graham states; “the value of a business is a result of its profitability.”
That profitability must also have staying power and maintainable earnings. Once you have established if the business is profitable, you then have to apply a multiple to that profit in order to realise its total market value along with many other considerations such as risk that need to be taken into account. This is something Paul Nielsen’s podcast touched upon in a little more detail when explaining how to really sell a business.
Turning a business asset into a cash asset
It can be difficult for someone who has built up their business after 10, 20 or even 30 years of hard work to know how to turn that business asset into a financial reward that will now help them with their future lifestyle choice.
A business broker who is a member of the AIBB can help owners realise the value of their businesses in several ways:
> By looking at the business as a whole in relation to the market
> Taking into consideration strengths and weaknesses
> Offering advice on how to prepare that business for sale
> Talking to business owners about how to grow the potential of their business
> Advising clients on how to get their paperwork and books in order
> Advising on the value of a business based on solid market evidence such as the AIBB Biz Stats and previous sales in the same area
So essentially, a business broker can offer so much more than just advice on businesses for sale and with a wealth of knowledge and other specialist members included in the network, a business broker who is a member of the AIBB is a valuable asset.
The Million Dollar businesses for sale
When it comes to risk, there seem to be two extremes in the middle of which sit many businesses for sale. At one end, you may have $1 million to invest in the Australian government 10 year bonds that pay 4% interest with zero risk – whilst at the other end of the scale you have the usual scam from a Nigerian company who promises to invest your $1 million and return it tenfold in just 3 months, with 100% risk of losing all your money.
Right now, Graham says, the low risk industries are government licensed ones such as taxis, childcare centres, licensed premises, etc, whilst delicatessens, video stores and small high street businesses may be seen as high risk businesses.
This is why the value of a business is not just about profitability but also how risky the industry is perceived to be.
The future of business sales in Australia
“I think technology threat and the shock of the new…is having a very dramatic effect on the values on established business models, such as retailer.”
Graham O’Hehir shares his thoughts with AIBB on how online businesses may go on to have a better longevity than well established retail businesses. He explains how, ten years ago, a newsagents or supermarket were generally thought to be good business investments but many of these businesses face new challenges with the advent of technology and so it is up to business owners now to embrace the chance or face being left behind.
Yet even online businesses for sale are still reeling from the effects the high Australian Dollar had on foreign investment, a downturn in business prices and a lack of supply that can leave buyers struggling to get exactly what they are looking for.
With the help of the right business broker, a buyer can still be matched with the right seller and business that has every opportunity to grow and flourish, even in a challenging market. As for online business sales, whilst the potential is still there for them to become valuable business assets, they still have a lot of catching up to do before they match that of other business models.
The last word on businesses for sale
Graham O’Hehir believes that despite the challenges businesses for sale face, there are great opportunities out there for the new generation of business brokers who could well end up dominating the Australian business broking industry. Of course, it also pays to be a respected member of the AIBB!
Listen to the full podcast with Graham O’Hehir , from Goodwin Mitchell O’Hehir & Associates, which reveals more of his knowledge on the subject of business brokering and business sales. Don’t forget to browse through all the resources on the AIBB website . If you need specific advice then don’t hesitate to get in touch with us.
Read the Transcript
Contact Details:
Graham O’Hehir
P: +61 8 9481 4422
F: +61 8 9481 4441
gohehir@buyabusiness.com.au
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The post Are you realistically valuing your business for sale? appeared first on AIBB Sales.
Source: http://news.aibbsales.com.au/podcast-6-realistically-valuing-business-sale/
