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Market Report

 

We've been fielding a high volume of calls lately from potential sellers and buyers, wondering how a tumultuous world economy is affecting the business sales arena. so we felt it appropriate to take a few moments to explain to you, our valued clients, exactly how we at Power ABA are experiencing the current economic climate.

People are panicked in many corners - and rightly so - but not here at Power ABA. We have weathered economic upheavals before, and for years have planned for days like these. we have learned to see that uncertain economic times mean increased activity across the broad spectrum of business sales.

Fortunately, Power ABA is prepared for whatever the future brings. We keep our focus and run our business not based on emotion but on sound business principles and our many years in this industry. There's no where else we'd rather be!

If you wish to sell, PowerABA will guide you throgh the process to achieve the best possible retrun on your investment, hard work and dedication.

 

2008-2009... The Crunch Year

The past four to five years have been good in the small business market. This has been to the excellent economy and easy finance. However, the general outlook for 2008-2009 is full of uncertainty. Several positive aspects still remain but a number of significant negative factors could affect the market

 

Positive Features...

STARTING IN GOOD SHAPE

The Overall market sector is still in good shape. The small business market started 2008 in a positive position. This means that the market has the capacity to with stand even a significant fall in demand.

                                                                                                               

BUSINESS HAVE STRONG BALANCE SHEETS 

Most small businesses throughout Australia have had really good financial years since the early 2000's So, the owners have strong financial assets behind them, allowing them to easily survive an economic downturn in 2008 if this

THE DROUGHT

If the drought breaks it will have an important impact on the economy, especially the regional town businesses,which have suffered badly in the past few years.

    

INTEREST RATES

self - explanatory

THE ECONOMY

The Australian economy is still strong. Even if it does slow due to events overseas, it is unlikely that a recession will occur in Australia in 2009.

 

 

Negative Influences...

The overall small business market should be able to ride out 08-09 reasonably well at this stage. However, an unusually high number of factors could adversely change the situation.

        

FINANCE AVAILIBILITY

A major concern is the drying up of finance for purchasers of small businesses. The banks have become more stringent in their criteria for lending to small business owners due to the sub prime crisis in America. Banks still want to lend money but are now closely scrutinising each deal. Deals that would have been financed in early 2008 are now being rejected.

This particularly applies to proving that the business can generate enough profits to repay the loan. This means that vendors will need excellent financial accounts, without them banks are unlikely to lend money  and the business may become un saleable.

INFLATION

Australia's inflation rate has remained low over the past few years. However this is starting to become a major potential problem for Australia due to :-

(1) Higher wages are starting to come through the system putting significant pressure on future inflation.

(2) China recently has exported deflation. However, inflation in China is now around 7% (+/-):China  may start exporting inflation to the world.

    

(3) The price of oil remains high. This is starting to flow into higher prices. demand for oil is now outstripping supply.

(4) The Australian dollar has been high for several years , if it falls significantly during 2008 this will increase the price of imports and thus inflation.

TRADE BALANCE

Australia has survived a major trade balance problem for the past 10 years because others outside Australia, have lent money to the banks. If the world stops lending money to Australia  major problems will occur.

WORLD ECONOMY

Many commentators expect the USA to go into recession in 2008-2009. Other parts of the world such as Europe & Japan are slowing.

Australia has enough strength to withstand a slowing in the world economy provided it is not too steep. However, Australia will not be able to resist a major slowing down.

Summary...

2008-2009 is going to be a crunch year for the Australian economy and the business market.

However,, at this stage enough positive features exist for the small business market to remain reasonable and balanced, especially in the first financial half.

The second half of the year is impossible to predict. Too many major negative influences could occur which would severely affect the market. These may arise and thus only a slight slowing of the small business market will occur. The dice are rolling..

-  0  -

 

 

@ June' 2008 ...

Prices of small business after being flat during 2007 have fallen over the past six (6) months. Overall demand has weakened during 2008 as a result of the economic uncertainty, interest rates, fuel prices etc. however, "good" businesses are still selling well. Overall, prices have fallen by greater than (>) five percent (5%) - depending upon the business type.

So, the market for businesses has softened over the last three months. The early months of 2008 were starting t ease and this trend intensified over the last quarter. The uncertainty to where the market was heading in early 2008 is now becoming clear. So, market conditions are likely to be weak for the remainder of 2008 at possibly into 2009 . The market has entered a weakening stage. the extent to which the market falls is difficult to assess at this stage but if the economy falters a major correction could occur.

ECONOMY

What is driving the market now is the uncertainty about the Australian economy. Several significant head winds are occurring; such as the interest rate rises, higher fuel costs, higher costs overall, fears of higher inflation & particularly wage costs and the $dollar. Business and Consumer confidence is dropping rapidly. There is a major indicator for slower growth. the lower confidence feeds into the decision making or purchasers.

FINANCE

Obtaining finance is also effecting the small businesses for sale market. Deals that were being done this time last year are now being rejected. Thus the purchasing power of buyers is falling. Banks are revising their lending criteria and have become more selective

PRICES

- The early evidence of price falls occurring in the last few months have become more pronounced. price reductions of some 5% are now common. Realistic 'asking prices' by the vendors, 'responsible' assessment and representation by the Business Broker will be required and both will need to concentrate on this aspect if the business is to be sold.

ACIVITY & SELLING TIMES

- Most states other than SA and perhaps NSW are still "travelling reasonably well" and/but the next six months will still be difficult; especially & particularly for businesses less than (<) $200,000. Selling times have increased, say 2-6 months if priced correctly.

 

 

@ October'2008...

The market for the sale of businesses continues to weaken both in terms of demand from purchasers and prices. The market is now a buyer's market-across all sectors of the small business market. this particularly the case for those businesses less than $250,000. With the larger businesses, demand is still reasonable and correctly priced businesses are still selling

ECONOMY

The market is now firmly been driven by factors affecting the economy. Media reporting has definitely cast a web of "doom and gloom" . The outcome for the next 6-12 months is for continuing slowdown coupled by entering into a recessionary period.

FINANCE

Obtaining finance for small business purchases is becoming more difficult.

PRICES

The main factors influencing prices at the moment are purchasers' confidence and obtaining finance

ACTIVITY & SELLING TIMES

Poor to weak responses are being experienced - moreso in print media scenario. There doesn't appear any "light in the tunnel"...until at least mid-June 2009... we might as well all go fishing!

 

 

TOP

 

 

  Marketing & Sales Guidelines

1

Resolve to org anise and track your leads. Make certain all leads are in the computer, rated adequately cultivated and followed up. This should increase business by 15%.

2

Resolve to be more visible in your market. Don't assume everyone knows you. Work on ways to be seen in your market place. Use public relations to attract attention.

3

Resolve to polish your business. Is your business projecting the right message with its logo and printed materials? Give your business a new look and see how many more customers notice you.

4

Resolve to make sure your customers see you as their first choice. Don't assume that customers are satisfied just because they are doing business with your company. Look for opportunities to communicate why it's prudent to do business with you.

5

Resolve to create a new marketing niche. Find a niche where you can be the expert. Then go to work developing new business. Become the leader in this niche.

6

Resolve to develop a marketing program. Every business needs marketing program.

Every business needs marketing power to thrive today.

Put on paper a program that will give you the edge.

Nothing happens without a road map.

7

Resolve to think longer term. You need to think about who your customers will be 2, 3 & 5 years from now. Begin communicating with these prospects.

8

Resolve to improve customer communications. Review letters you send & think about those you could be sending. Create new, conversational letters that communicate using the word 'you' more often than 'we'.

9

Resolve to let customers know that you appreciate their business. It's dangerous to assume that your customers know you care. Find ways to present your commitment to customers.

10

Resolve to marketing as an  investment in the future of your business. A constant flow of new customers who want to do business with you is the result of investing in an adequate marketing & sales effort.

11

Resolve to create some excitement! It's time to beat the drums, turn up the music and let it roll. If you're not making the customers heart go pitter-patter, you're not doing the job.

 

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In Demand... Difficult To Sell...

Wholesalers

Trades

Service (5 days)

Retail (Shopping Centres)

Employment Agencies

Photo Developers

Child Care Centres - large

*

Supermarkets

Jewellery Stores

Liquor Stores

Cleaning - Small

Caravan Parks

Profit less than (<) $70,000

*

Hardware

Manufacturing

Lawn mowing

TOP

for information purposes only...

KUDOS ROI (%) NPBT PRICE
         

Accountancy

good      

Advertising Agency

weak 65-85 100,000 135K

Amusement Round

fair 60-80 50,000 68K
" " 60-100 100,000 125K

Auto Workshops

poor 80-100 58,000 60K
" " 65-80 100,000 135K

TYPE

KUDOS ROI NPBT PRICE

Backpackers

  $ x $day  per bed    

Bakery - Non Franchise

weak 50-75 50,000 70K
"   45-60 100,000 180K

Bakery- Franchise

fair 40-55 195,000 195K

Bookshop

weak 60-80 50,000 75K

Bookshop

weak 40-55 100,000 195K
" good 37-48 200,000 450K

Boutique

poor 60-100 50,000 58K
" weak 60-80 100,000 140K

Butchers

fair 65-80 50,000 70K

TYPE

KUDOS ROI NPBT PRICE

Cafe

poor   50,000 75,000
" fair   100,000 150,000

Car Dealers

weak 55-75 100,000 145K

C' Van Park-F/Hold

  13-20 150,000 1M

C' Van Park - L/Hold

good 23-32 100,000 370K
"   23-26 200,000 810K
"   20-25 400,000 1.7million

Cards & Gifts

  45-60 125,000 238K

Caterers

poor 70-95 50,000 60K
  weak 55-75 145K  

Childcare

Centres

weak 50-65 50,000 85K

"

strong 33-45 100,000 265K

"

  38-44 200,000 480K
"   30-35 400,000 1.1M

Cleaning

poor 65-100 50,000 35K
"   75-90 100,000 130K

Coffee Shop/5-6 days

fair 60-80 50,000 68K
good 43-55 100,000 225K
" good 35-43 200,000 500K
" good 40-60 300,000 300K
" good 32-38 400,000 1.050
" good   500,000  

Coffee Shop-7 days

weak 50-70 100,000 170K
fair 40-50 200,000 440K

Coin Laundry

  30    

Consultants

weak 65-80 100,000 135K

"

  80-90 200,000 260
"   70-80 400,000 590

Couriers

poor 70-90 50,000 60K

TYPE

KUDOS ROI NPBT PRICE

Delicatessan

poor 90-110 50,000 48K
poor 80-95 100,000 105K

Dry Cleaning

weak 45-65 50,000 70K
weak 45-65 100,000 180K

TYPE

KUDOS ROI NPBT PRICE

Employment Agency

good 40-65 100,000 200K

Equipment Dealer

weak 45-65 100,000 180K

"

good 35-50 200,000 415K
"   38-44 400,000 920K
"   33-38 600,000 1.6M

TYPE