With business-buyers’ positivity seemingly cemented to only slightly higher or lower than neutral, one would expect that the enquiry rate from that same group would mirror that sentiment. In contrast, this survey period, Xcllusive has seen an unexpectedly large jump in enquiries from business buyers. New buyer enquiries rose by over 9% this period and business enquiries overall rose by approximately 17%. In fact, May’s new buyer enquiries were the highest they’ve been in over 8 months. Which begs the question, when buyer sentiment is so neutral, why was there a surge in enquiries? Truthfully, we didn’t have to look far to find the answer:
One little accounting practice for sale.
Over the course of the business’s first week on the market it received four offers and more than double the enquiries that most businesses will get over the course of three months. A response rate this high is so rare that the last time we saw it was six months ago during the first week of marketing for the last accounting practice Xcllusive worked with.
This is what it is like to sell a business in an in-demand market. Which begs the question, what are the factors that are making accounting practices so attractive at the moment, and how can sellers in other industries mimic that?
Factors that make accounting practices attractive in the current market:
- Security of income
- Easy to incorporate into an existing business
- Repeat business
- Easy for existing accountants to operate
- High necessity service
- Easy to finance – NAB will finance 60% – 80% of total annual revenue
- Low supply, high demand
Realistically, it will be difficult, if not impossible, for other industries to tick all of these boxes. For example, not all businesses can be incorporated into an existing business, nor is business finance easy to obtain for most businesses for sale. This too has been reflected in this month’s survey, with respondents returning the lowest result in 12 months in regards to their ability to obtain finance.
Not all businesses offer a high necessity service either, leaving us with only a handful of factors that can be addressed to bring a business up in the business sales market. Here’s a brief overview of how business sellers might do this for their business based on the key factors listed above:
Security of Income
This can be established by having a solid set of financials for at least the three most recent years. Generally though, the longer the business has been established with either consistent or growing profits, the better.
Most businesses do have some form of repeat business, but rarely is this recorded. Take steps to firstly establish what portion of your business is built through repeat business, and secondly, establish a method to ensure maximum retention of this group when a new vendor takes over.
Ease of Operation
All businesses have their own idiosyncrasies in the way that they are run. To a buyer though, these idiosyncrasies will be perceived as elements of operation that will make running the business difficult. To allay this concern, offer to your buyers a training period in which they can learn the ropes. A buyer will feel comfortable buying a business once they know that they will be able to maintain and grow it.
The results of this month’s survey have indicated that confidence in the current buyers market is still low, meaning that business sellers must take steps to boost confidence in their own business rather than simply waiting for a confident buyer. Accounting practices naturally do this, the result of which is that the buyer response is higher than the average buyer response even before the global financial crisis. In this market, this kind of response is difficult for sellers in other industries to aspire to; but aspire they must. By taking the right steps and the right preparation, and most importantly, helping a buyer see the value in his or her business, a business seller can find the right buyer and most importantly, get them across the line.
By Zoran Sarabaca
Xcllusive Business Sales
Sell your business with Certainty
* Disclaimer: This survey was distributed to over 2,150 people through the Xcllusive database. The information generated is from a series of questions asked in that survey. All of the results can be found on the Xcllusive website www.xcllusivebusinessbrokers.com. Please note Xcllusive does not guarantee the findings are free from errors and that this survey is not to be considered as business advice.