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WA Small Business Market Outlook 2023

Are you thinking about selling or buying a business this year? If so, read on – there may be some great opportunities for you in the WA Small Business Market in 2023. The COVID-19 pandemic had far-reaching consequences across the business sector, starting with many businesses closing their doors permanently as a result of lockdowns, to longer-term effects such as the present labour shortage. Given how widespread COVID’s impact was on small businesses, there are some interesting trends in the market, especially where business sales are concerned. Some industries are looking ripe for a few bargains, while others may be a tougher sell for vendors and business brokers. Let’s have a look at what’s hot and what’s not in the small business market.

WA Small Business Market – What’s Hot

There are a few business types that are in demand in the current market, where solid return on investment (ROI) figures are driving buyer demand. These include supermarkets, liquor stores, service stations, medical practices, and I.T. businesses. There is strong demand for businesses that require a lower number of staff, and for those that operate more on a B2B (Business to Business) basis rather than B2C (Business to Customer). Investors are also looking more towards suburban shopping centres as opposed to brick-and-mortar locations in the CBD.

Businesses that fall outside the current group of businesses in demand can still fetch reasonable sale prices, but this would rely on having additional value-add items that comparable businesses cannot offer. This highlights the importance of developing and growing your business over time and ensuring that you are always working to add value for any potential future sale.

WA Small Business Market – What’s Not

The current economy and lingering effects of the pandemic has reduced the appetite of investors in purchasing a range of business types – including general retail, bookstores, newsagencies, gyms, and printing businesses – but perhaps most notably restaurants and cafes. Rising food input costs is a significant factor, causing a knock-on effect on margins and the need to either absorb the extra costs and reduce profit, or pass these costs on to customers by increasing prices (potentially leading to a decrease in sales). Further impacting restaurants and cafes are cost of living pressures, as many people are needing to closely scrutinise discretionary spending – and meals out and coffee purchases are often the first things to be cut from their budget. The current labour shortage and lack of backpackers and international students is severely impacting the pool of available workers for these businesses, forcing them to either operate short-staffed or offer higher wages to attract staff, which in turn increases their overheads. This is particularly challenging for hospitality businesses, as they typically rely on having a lot of staff to keep things running smoothly. The growing popularity of Uber Eats and other changes in consumer habits don’t help the cause here either. No matter how you slice it, restaurant and café values have fallen, and low demand for those businesses looks set to continue until the labour market picks up, and costs come down.

Looking Ahead

Clients of McKinley Plowman have access to the expertise of our in-house accounting and business improvement team, including due diligence and business valuation services. We can also put you in touch with our extensive network of professionals and alliance partners including business brokers and other relevant specialists. With us, you can maximise the sale price of your business, or get the best deal possible for a business you’re looking to purchase. Please do not hesitate to contact us today on 08 9301 2200 or visit our website.

Data From: Jarot Business Valuations Newsletter January Quarter 2023

written by:

Nigel Plowman

Prior to forming McKinley Plowman, Nigel specialised in management consulting and international accounting, enjoying success in Australia and in the United Kingdom. His extensive experience in management consulting, international accounting and innovative tax structures has been a major driver in the success of McKinley Plowman as well as the many businesses he has steered towards new levels. Nigel is dedicated to fast-tracking his client goals with cutting edge tax and business strategies. He is a member of the CPAs and the Taxation Institute of Australia and enjoys developing tax strategies that work well here and around the world.