FacebookYoutubeLinkedIn
Live data feed: 6am 23rd May 2024         Total Business Sales: $523.9 million         ROI On Capital Invested: 28.00%         EBITDA To Owner: $159.4 million         Recent Deals: Safety Height Inspection & Fall Protection - Strategic acquisition by PE Trade Player     |     E- Commerce On-line Resume Writing - Strategic acquisition by Trade Player     |     Solar Lighting Solutions - Strategic acquisition by Trade Player

BUYER DEMAND CYCLES

Garry Stephensen

Article Author: Garry Stephensen
Position: Managing Director
Read time: 5 mins

Share Article:

The Australian business landscape witnesses predictable trends in buyer demand, affecting business sales throughout the year. To assist Australian businesses, this analysis explores the cyclical patterns of buyer interest and their implications for sellers and business brokers. These patterns, identified over more than two decades, have a significant impact on the timing, pricing, and success of business transactions.


Buyer Demand -  Peaks and Valleys

A comprehensive examination of buyer demand has revealed consistent fluctuations in monthly rates of buyer enquiries. Several months stand out as the busiest periods when potential buyers express the highest interest in acquiring businesses. These months are Jan – March,  September to NovemberApril, May, June, July, and December also tend to be quieter.



Line Graph of BUYER DEMAND CYCLES in australia


Several factors contribute to the annual fluctuations in buyer demand for businesses in Australia. Understanding the drivers behind these patterns is essential for businesses and brokers to make informed decisions. Here are some reasons why these fluctuations exist:

  1. Seasonal Trends
    Seasonal variations in buyer demand can be linked to holidays and special events. For instance, January and early December tend to be busy months as many people have time off work and are in a more relaxed state of mind, making it an opportune time for them to explore business opportunities.

  2. New Year Resolutions
    The beginning of the year often sees individuals setting new goals and resolutions, including entrepreneurial ambitions. This mindset shift can lead to increased interest in buying a business in January and February.

  3. Economic Factors
    Economic conditions and market confidence can impact buyer demand. During periods of economic growth and stability, buyers may feel more confident in making investments, leading to higher demand. Conversely, during economic downturns or uncertainty, demand may decrease.

  4. Business Cycles
    Certain industries and businesses may have seasonal cycles that influence buyer interest. For example, businesses related to tourism or hospitality may experience increased demand during the holiday season, while demand for other types of businesses may be lower during the same period.

  5. Tax Considerations
    The end of the financial year in Australia is in June, which can lead to an increase in buyers seeking to make tax-related purchases or investments in the preceding months, influencing demand in April, May, and June.

  6. Lifestyle and Personal Factors
    Personal circumstances can play a significant role in driving buyer demand. People may be more inclined to explore business opportunities when they experience life changes, such as a new year, a new job, or retirement.

  7. Marketing and Promotion
    Businesses and brokers may strategically time their marketing efforts to align with the peaks in buyer demand. This can create a self-fulfilling prophecy where increased marketing and visibility drive more inquiries.

  8. Local Events and Traditions
    Regional variations in demand can be attributed to local events and traditions. Special occasions, holidays, or cultural practices can affect buyer behaviour differently in various regions of Australia.

  9. Business Owners' Strategies
    Business owners who understand the demand patterns may choose to list their businesses during peak times to maximize their chances of a successful sale. Conversely, some owners may delay listing to avoid unfavourable market conditions.

  10. Word of Mouth and Referrals
    Word of mouth and referrals among potential buyers may also contribute to demand fluctuations. Positive experiences and success stories shared within the business community can spark interest at specific times of the year.

In summary, a combination of economic, seasonal, and personal factors, along with marketing strategies and local influences, drive the fluctuations in buyer demand for businesses in Australia. Business owners and brokers can leverage this knowledge to optimize their selling and buying strategies and achieve better outcomes in the dynamic business sales market.

 

ANNUAL BUSINESS BUYER DEMAND CYCLES  IN THE AUSTRALIAN MARKET


Regional Variations

It is important to note that there are regional variations in buyer demand. For instance, Queensland experiences a rapid increase in demand from the early days of January, whereas Adelaide and Melbourne have a slower buildup. Additionally, special events, such as football finals and the Bathurst weekend, contribute to lower buyer interest. Similarly, Melbourne witnesses a lull in the last week of October and the first week of November, attributed to the Spring Racing carnivals and Melbourne Cup.


Implications for Australian Business Owners

The annual ebb and flow of buyer demand underscore the significance of timing when selling a business to achieve the best asking price. The correlation between demand and price is undeniable. Selling a business when demand is on the rise, such as in January, generally results in a higher selling price and a faster transaction. Conversely, attempting to sell in the quieter months of June, July, or August may lead to a slower sale process, often requiring price reductions and yielding less favourable outcomes.
Therefore, business owners are encouraged to align their selling strategies with the peaks in buyer demand. Analysing buyer demand data and planning sales accordingly can significantly enhance the outcome of business transactions. Read more tips for a successful business sale .


ANNUAL BUSINESS BUYER DEMAND CYCLES  IN THE AUSTRALIAN MARKET


EBITDA Add Backs: A Key Consideration for Sellers

In addition to timing, business sellers in Australia should be familiar with the concept of EBITDA add backs. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) add backs are expenses or deductions that are added back to the EBITDA figure to reflect the true earning potential of the business. These add backs are important for business sellers as they can positively impact the business's perceived value.

Example Formula for EBITDA Add Back Calculation

EBITDA is a popular method to calculate the asking price for a business. To calculate EBITDA add backs, sellers should identify and quantify expenses that are not essential to the core operations of the business. An example formula for EBITDA add back calculation is as follows:

EBITDA Add Back = Non-Recurring Expenses + Owner's Perks + One-Time Costs

By adding back non-recurring expenses, owner's perks, and one-time costs to the EBITDA, sellers can present a more accurate picture of the business's profitability to potential buyers, potentially increasing the perceived value of the business.

As seen in the Financial Review and the Courier Mail.

 

In conclusion, Australian businesses can benefit from understanding the annual buyer demand cycles. Timing business sales to coincide with peaks in buyer demand can lead to higher sale prices and faster transactions. Additionally, the concept of EBITDA add backs is a valuable tool for business sellers, helping to present a more accurate view of the business's financial performance to prospective buyers. In this dynamic market, preparation and strategic planning are key for both business owners and business brokers to maximize their success in the sales process.

Business Broker - Garry Stephensen

Garry
Managing Director
Business Broker - Karen Dado

Karen
Director NSW
Business Broker - Geoffrey Tulett

Geoffrey
Lloyds Corporate Partner - Mergers & Acquisition Specialist
Business Broker - Edward Alder

Edward
Director Victoria
Business Broker - Kevin L Sutherland

Kevin
Director International Business Sales
Business Broker - Dianne Reynolds

Dianne
Research Director and Corporate Broker


Get In Touch

Email




Contact the team at Lloyds Brokers for expert broker assistance. Our VIC team have bases in geelong, ballarat and yarra valley (VIC).
 
Lloyds Corporate Brokers is a Corporate Authorised Representative under AP Lloyds Pty Ltd.
Australian Financial Services License 526061
Recent Press Releases:

Copyright 2018 © Lloyds Business Brokers 2008