Doom and gloom surrounding the economy has littered New Zealand’s media for months. It feels like we’re destined for hopelessness, but LINK’s Business Development Manager Steven Matthews is here to reassure you that this couldn’t be further from the truth.
“The reality is we’re at the other side of the pandemic now,” Steven says. “Interest rates have been at a historical low recently and they’re still considerably low, so even though it’s not the cheapest time to buy finance, it’s still very competitive” he adds. It’s important that buyers don’t get discouraged and instead, listen to the professionals.
Looking ahead, Steven acknowledges that the market appears stable. He notes a shift from a seller dominant market to a more evenly balanced one. “More businesses are coming to the market, which means buyers have more choice when purchasing. We’re seeing buyers be cautious in their approach, but the level of inquiry remains high and competitive,” he says. High value businesses are particularly in demand.
Over the holiday period, it’s natural for business sales to slow down. However, Steven notes that this is an integral time. “This is where we see buyers and sellers reassess everything. Vendors are considering selling their businesses and buyers are deciding if they want to change their lives in the new year.”
Steven has invaluable insight for buyers. “Business ownership is one of the best ways to secure wealth. Instead of buying a house, invest the money in a business. You can get ahead far quicker by equity built because it’s uncapped,” he advises.
He also encourages business buyers to not get caught up on the price. “We often see buyers lose the perfect opportunity because they can’t bridge the gap with vendors,” he states. “If you’re buying a business be realistic when negotiating the deal, you don’t want to miss an opportunity. As an example, $30k over seven years, equates to the price of a coffee and a donut!”. Over time, you will build your business up and that 30k won’t matter.
It’s a similar story for sellers. “The reality is you might not find another buyer, so when you’re presented with the opportunity to sell, you need to take it seriously. The difference between selling and not selling your business is huge. Either you’ll walk away with nothing, or a chunk of money,” he says. Focusing on the big picture instead of waiting for a better offer is crucial.
Additionally, Steven stresses the importance of an exit strategy for vendors. “In 3-5 years, baby boomer businesses will hit the market, which means more competition. It’s important that sellers are preparing for an exit rather than compulsively selling. It’s all about getting the right price and engaging the right people,” he says.
“The earlier you get into the market, the more equity you can build. Alternatively, business ownership is a fantastic way to get ahead in life. Assess the risks, do your homework and be prepared,” Steven concludes.
