Business prices have largely been stable over recent years, but with interest rates hovering at their lowest level in a long time and with demand for good quality businesses exceeding supply, it’s not surprising to understand that business prices are on the rise!
Investing in a business starts to look pretty good when compared to bank interest rates of around 2%-3%. Traditionally a good business will yield 20% – 35% (BT) after management costs.
Since the GFC, the law of supply & demand has been an additional factor as well, as many potential buyers have found out to their lament. Many search high and low for months on end (some looking for up to 2 years) to find a business that suits them with low risk and a good return.
But the picture is not simple. Not all businesses are enjoying the same price gains. Some are up, like industrials and child care, whilst others, like restaurants and pharmacies, have seen their values go south.
Overall, recent times have provided the greatest change in business prices in over 20 years.
With interest rates predicted to remain low and the typical “baby boomer” holding on to his business for longer to build up his/her retirement package, upward pressure is predicted to continue for those popular businesses in the right position at the right time.
Moreover, with recent distractions now past (Brexit, EOFY, Federal Election) it appears that now, is a very good time to sell for those who have got a really first class business.