MESSAGE FROM THE PARTNERS
With the new financial year upon us and COVID still looming around, both buyers and sellers are wondering how to understand the market… what is ‘fair market value’ in this current climate?
The truth is, there is no simple rule to follow. As this is a challenge most people are having, we have decided to put together some thought-provoking principles and questions for you that we believe you should be asking to help with finding the answer.
We are sure you can relate to the following:
Buyers are wondering if they should wait in case there is going to be another dip, or if they need to adopt an opportunistic mindset and only look for bargains for an acquisition to be considered ‘fair’ or ‘successful’.
Sellers are wondering if any recent changes to their sales as a result of COVID-19 has impacted what their business is worth, especially if they were already thinking about selling prior.
Just because COVID is here, doesn’t mean that you have to sell at, or should buy for a bargain, there are huge amounts of businesses that are breaking revenue and cost records during this time that have managed to maintain their value if not increase it.
Below are some questions and principles that you may find helpful:
1. What appears to be a bargain is often far from cheap. There is ALWAYS a reason behind a bargain – find out what it is!
2. Deals should be put together focusing on transitional handover periods, and strong relationships between the seller and buyer.
3. Which is most likely to indicate the future performance of the business – the numbers during or before COVID-19?
4. How has the conduct of the business changed? Have any new products or services replaced old ones?
5. Has a business adopted new technology, operating processes, or procedures?
6. Are the products or services of the business more in demand or less?
7. How resilient has the business been compared to its competitors?
8. Does the business operate in a sector or industry that offers natural or external growth?
9. Landlords are commercially minded people, as they cannot predict the future it is unlikely that they will promise much more leniency than what the government enforces, so make your assessment of value based on the current rental terms.
Perhaps the biggest tip we can give you when assessing the value of a business is to think where it is likely to be in 5 years, not how cheap it is today. Remember you are buying or selling future maintainable earnings – not last week's earnings.
THIS WEEK'S INTERVIEW FROM OUR SME COMMUNITY
We spoke with Hadi Ashnaei of The Talent Playbook
This is one of the sectors that is currently having its most challenging times and certainly a sector that we all have due responsibility in to support.
Hospitality is one of those industries that's the livelihood of so many small businesses, people, and families. It's really the heart and soul of many great cities.
Join our Facebook Community to watch the full video.
Our mission is to transcend the standards of the business broker industry, and this means so much more than just selling businesses.
We would love for you to be part of our community.
From all of us at Vision Broker and Advisors, we really look forward to working with you.
Good luck, and make sure you have a look at our business for sale.