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Chris Small: ASB Business Managing Director says NZ businesses are getting back on track · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: And the business of buying and selling businesses in this
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  Speaker 2: country seems to be booming. New data this morning, sales
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  Speaker 2: are up twenty eight percent on this time last year.
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  Speaker 2: Average price is up three percent. Chris Small is a
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  Speaker 2: managing director of ABC Business and is back with us.
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  Speaker 2: Chris morning to you. What's the role of the economy
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  Speaker 2: at any given time or does this sort of thing
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  Speaker 2: have a life of its own?
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  Speaker 3: Oh look, it's a bit of a combination of both.
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  Speaker 3: Book well, I think you'll find reasoningly interesting is the
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  Speaker 3: regional spread so in line with the sort of the economy.
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  Speaker 3: The South Island was up seventy percent year on your
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  Speaker 3: own business sales and Wellington, no surprise, down to ten percent.
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  Speaker 3: So really there is a correlation because we all know
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  Speaker 3: the South Island has been going a slightly better ten
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  Speaker 3: po than Wellington and that's replicated in the data we've got.
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  Speaker 2: So if it wasn't for the South Island and farmers,
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  Speaker 2: we'd be stuffed, wouldn't we.
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  Speaker 3: I'm not sure that's quite fair. Aukward why Cadom Bay
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  Speaker 3: have plenty we're up twenty percent, but I certainly think
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  Speaker 3: you know, we could say about Wellington there's plenty of
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  Speaker 3: roomful improvement in regards to their economy.
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  Speaker 2: We're seeing listings are down. Do we know why?
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  Speaker 3: Yeah, we're do my and it's a reasonably prominent trend.
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  Speaker 3: So in the last two years, if you use trade
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  Speaker 3: me as a barometer, business listeners are down twenty percent.
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  Speaker 3: And that's because when you talk to business owners, they're going, look,
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  Speaker 3: we don't want to bring our business to market because
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  Speaker 3: we've had two tough years. Our profitability is not where
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  Speaker 3: we want to be. We want to build it back up.
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  Speaker 3: Then we're going to come to market because obviously the
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  Speaker 3: amount of profit your business makes has a direct correlation
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  Speaker 3: to the value of the business.
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  Speaker 2: Yeah, what about the categories and sectors? Who's doing well?
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  Speaker 2: Who isn't well?
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  Speaker 3: Look, interestingly enough, education, health and services are allowing for
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  Speaker 3: fifty percent of money invest in businesses, so they're the
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  Speaker 3: most popular. Seat is healthcare and healthcare that covers age care, childcare.
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  Speaker 3: Those sorts of industries are really popular, especially childcare where
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  Speaker 3: government funding plays a big part in the business model,
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  Speaker 3: so that people get pretty comfortable they can go in
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  Speaker 3: there and make a buck when the government's committed to
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  Speaker 3: funding that sector.
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  Speaker 2: So yields are good in general. It yields up by the.
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  Speaker 3: Way, Yes, yep, they are just slightly. So they're at
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  Speaker 3: the top end of the range. So multiples are three
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  Speaker 3: point sixty two. That's the top end of the range.
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  Speaker 3: We've sort of bounced between three point three to three
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  Speaker 3: points success. That's a multiple. So if you reverse that
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  Speaker 3: that that's a yield of twenty eight percent on money
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  Speaker 3: invested in a small business.
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  Speaker 2: The average price, I notice eight hundred thousand dollars. Does
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  Speaker 2: that tell us anything? I mean, what do you get
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  Speaker 2: for eight hundred thousand dollars. You can't buy a house,
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  Speaker 2: so you can buy a business. So I suppose that's good,
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  Speaker 2: isn't it? Yeah?
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  Speaker 3: What is? We think about it? So, if you're paying
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  Speaker 3: let's say three times for a business, that means that
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  Speaker 3: business is doing approximately two hundred and sixty thousand dollars profit.
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  Speaker 3: You know, you could buy a business with three or
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  Speaker 3: four employees and it's spitting out to an owner two
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  Speaker 3: hundred and sixty thousand dollars a year. So I'd arguably
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  Speaker 3: say that's probably money better spent than investing in a
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  Speaker 3: properly which is going to yield you about four or
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  Speaker 3: five percent. But you know New Zealand is slowly cottoning
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  Speaker 3: onto that.
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  Speaker 2: And do you break down the dart, I mean, how
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  Speaker 2: many of these people have never bought a business in
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  Speaker 2: their life? Business? These are just people who buy and
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  Speaker 2: sell businesses or add another business to a business they've
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  Speaker 2: already got.
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  Speaker 3: Yep, great, Queen, we do do that. So we do
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  Speaker 3: the demographics. So about a third of purchases are people
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  Speaker 3: who already own a business, so they're like, you know,
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  Speaker 3: building up their portfolio as it were. And then you'd
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  Speaker 3: say the other sixty or seventy percent is a mixture
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  Speaker 3: of people who are coming out of corporate world, so
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  Speaker 3: they've got good business experience but haven't actually owned a business.
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  Speaker 3: And then you've also got a lot of migrants coming
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  Speaker 3: to New Zealand from the likes of China and you're
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  Speaker 3: in the Philippines. You could arguably say they've probably got
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  Speaker 3: a bit of experience from where they're coming from and
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  Speaker 3: buying businesses.
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  Speaker 2: Exactly. All right, Always good to have you on. Chris
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  Speaker 2: Chris Small, who's the ABC business managin director. It's a
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  Speaker 2: good time to be in business. It looks like it.
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