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Small business is back

January 11, 2021

After a challenging year, the outlook for small business is cautiously optimistic, although more owners will have a better idea about their prospects once the JobKeeper scheme ends in March, according to business broker, Simon Winter, Principal of Business Sales.

In November 2020, Roy Morgan Business Confidence jumped 10.4pts to 109.1 – the highest monthly reading for over a year since September 2019 (110.6). Business Confidence increased a record 23.5pts (+27.5%) in October and November.

Meanwhile, almost a quarter (24%) of businesses reported an increase in their monthly revenue in November compared to 16 per cent in October, according to results released by the Australian Bureau of Statistics (ABS) recently.

ABS Head of Industry Statistics John Shepherd said the latest Business Impacts of COVID-19 Survey showed signs of increasing confidence among businesses. The survey results also included information about capital expenditure plans for the next three months. John Shepherd said, “One in five businesses indicated they have capital expenditure plans over the next three months, with about three quarters of these businesses expecting to spend the same or more than what is usual for this time of year.” 

As a Business Broker in Adelaide, Simon spends every day looking at small businesses. “I am at the sharp end of understanding how small businesses are coping during the pandemic. I have been asked to comment on how optimistic I am about an economic recovery in 2021 – and to be too optimistic at this stage may well be jumping the gun.”

In the latter part of 2020, we have been faced with a stream of vendors who are convinced their business is doing well. Simon said, “In some cases, this is quite true; however, when you peel back the layers and remove the Government support and rent relief business owners have received, this façade begins to crumble for many.”

While some vendors have an inflated view of their business’ position, in contrast, many purchasers are convinced that any business currently on the market must be doing poorly. “Finding equilibrium in the expectations of both parties is rare and sometimes unachievable.  Contract conditions are stringent and Due Diligence periods are scrupulous and extended.”

Raine & Horne Business Sales statistics reveal banks now fund 20% of transactions, where it was once over 80%. Time on market is longer than it has ever been, but real business returns are no different to what they were 20 years ago, the same with median sales prices, Simon noted.

In March 2021, the extended JobKeeper Scheme will finish, and only then will we have a better idea of where 2021 will land for small business. Simon warned, “I believe we are not even close to seeing or understanding the fallout from the pandemic. While the Government support has been beyond expectations over the last nine months, it has only served to kick the can down the road.  For that reason, I see the future of so many small businesses in terms of survival and not optimism.”

If you’re interested in buying or selling a small business, contact Business Sales on 08 8361 3074.