The number of private businesses for sales remains near record levels according to the latest BizExchange Index which covers the March quarter.
BizExchange’s research found the percentage of businesses with EBIT (Earnings Before Interest and Tax) values between 1 and 2 remained fairly steady from the last quarter.
There were 32,597 businesses advertised for sale, only a slight fall from the last quarter when 32,789 were advertised, a record number.
BizExchange also recorded some softening in prices particularly with businesses with turnovers of less than $1 million. In contrast, prices on larger businesses were noticeably stronger.
BizExchange chairman David Bird said it is hard to tell how many private businesses are for sale because they’re not all advertised, but what is advertised provides a good indication of the health of business sales.
“There are a lot of companies going broke and there are a lot of small companies not making any profits,” he says.
Bird says the figures reflect the difficult market conditions for small retailers and hospitality businesses.
“It may also presage the first wave of baby boomers selling good, established businesses”.
Bird says most small businesses are critical of the negative impact of Fair Work legislation which has reduced the flexibility of working hours and other conditions.
In the hospitality sector Bird said over-capacity created in the lead up to 2008 may be a factor affecting the profitability of restaurants.
He also points to the downturn in the mining and construction industries which has led to the deferral of many projects.
This in turn has a “substantial flow-on effect”, putting pressure on service industries which are heavily project related.
“All businesses dislike uncertainty and the current Federal Government has tended to exacerbate this with numerous policy changes adding to the general uncertainty surrounding the world economy,” Bird says.
“The one bright spot is that for potential business buyers able to fund a purchase the current environment may provide an ideal time to invest.”
Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany the results show a lack of confidence.
“What I am hearing is there are a lot of businesses for sale and they are cheap as,” he says.
“The sad thing is that a lot of them will not be able to sell their businesses as people are not interested in buying at the moment.”
Strong says penalty rates are a key issue for business owners in hospitality and retail in particular.
“In the past we used to have assistance to businesses in change and maybe that is something the government needs to look at,” Strong said.
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
