As a business broker, I need to be direct with you: the current economic climate in Australia makes selling your small business a significant challenge. With reports showing a decline in consumer spending, small businesses are suffering, and this has a direct impact on your business’s value. At this moment, being realistic is not just a suggestion; it is the only way to get a deal done.
Here’s my guide on how to position your business for sale when the economy is working against you.
1. The Expectation Gap Has Never Been Wider
The disconnect we’ve seen since the pandemic is now compounded by a struggling economy. Buyers are more cautious than ever, and their offers reflect this.
- Buyer’s Reality: They see falling consumer confidence and reduced spending, which directly impacts your business’s revenue and future profitability. They’re wary of the current risks and will be very conservative with their valuation.
- Your Reality: You’ve worked tirelessly, and you may feel that your business is worth more than the offers you’re receiving. However, what a business is “worth” is always determined by the market, and right now, the market is constrained.
My advice: We must anchor our expectations to the current economic reality. We’ll present your business based on a long-term average, demonstrating its resilience through difficult times. A realistic price in a down market is far better than no sale at all.
2. Focus on “Recession-Proofing” Your Business
While the economy is weak, buyers are still looking for good opportunities. They are specifically looking for businesses that can weather a downturn. Your goal is to show that your business is one of them.
- Cash Flow is King: Buyers will scrutinize your cash flow and liquidity. You must demonstrate that your business can manage its expenses and stay afloat even with reduced sales.
- Essential vs. Discretionary: Businesses that provide essential goods or services (e.g., medical, plumbing) are more resilient than those in discretionary sectors (e.g., retail, hospitality). If you’re in a discretionary business, you must prove that you can adapt to keep revenue coming in.
My advice: We’ll highlight your business’s ability to operate efficiently in a tough environment. We’ll focus on your cost-cutting measures, your loyal customer base, and any diversified revenue streams you have. This proves to a buyer that your business is a safe bet.
3. Build a Business That Runs Without You (Now, More Than Ever)
This has always been important, but in a challenging economy, it’s absolutely critical. A buyer is taking on a significant risk, and the last thing they want is a business that relies entirely on you.
- Documented Systems: If your knowledge is in your head, the business is a liability. You need to show that the business can run without you from day one.
- Strong, Empowered Team: A team that can operate independently and effectively in a difficult climate is your most valuable asset. Buyers will pay a premium for a business with a solid leadership and staff.
My advice: A buyer wants to purchase a future income stream, not a job for themselves. We need to show them that your business is a well-oiled machine, ready for a new owner to step in and lead it through the current economic challenges.
