South Coast & Southern Highlands – A Big Year For Business Sales
As the only fully dedicated Business Sales and Acquisitions team in the NSW South Coast & Southern Highlands region, MMJ has a unique view of the local economic situation. Being on the doorstep of Sydney and Canberra, the two region’s economies are normally highly reliant on these cities for economic input primarily in the form of:
- Jobs for commuting residents with 35,000 Illawarra residents commuting to Sydney daily in 2019 according to Wollongong Council figures
- Tourists – nearly 2 million annual visitors to the Southern Highlands and 7 million to the NSW South Coast spending $644m according to Destination NSW in 2019
I’ve chosen the data from 2019 on purpose, as so much has changed since the onset of COVID19 in early 2020. With the days of lockdowns and regional travel restrictions seemingly behind us, I am focused on the business impacts that appear more likely to stay with us through 2022 and beyond. The good news is these lasting impacts are generally positive for businesses and offer opportunities for business buyers and sellers looking for a successful exit.
January 2022 was our record month for business buyer enquiries, and for the reasons outlined below we strongly believe this demand for businesses who can demonstrate future maintainable earnings will continue through the year.
Work From Home Impact
The first impact is the boost to regional economies from residents working from home rather than commuting to Sydney or Canberra. Whilst there will undoubtedly be drift back to commuting during 2022, it is widely thought that many workers will adopt a hybrid of home and office work habits. This will mean some of the increased regional spending by residents will remain which is great for local businesses.
It also creates a new class of investor business buyer, with full-time non-commuting workers now considering buying a business under management in their local area as they are now able to keep a closer eye on the business. Some buyers are looking to use this as a transition away from employment into becoming an owner operator of a local business. The motivation to avoid returning to commuting could also inspire individuals to seriously consider becoming a business owner operator.
With international tourism remaining challenging, there are promising signs that tourism to both the Southern Highlands and South Coast will remain at historically high levels through 2022, with accommodation frequently booked out well in advance. Tourism spending obviously benefits some business types more than others, but the employment generated provides wages to residents who then spend that money across all businesses.
The second impact of increased tourism is that it showcases successful businesses and the regional lifestyle to potential business buyers. We often see an increase in buyer enquiries just after holiday season, when visitors return to their city jobs with memories of the bustling cafes they visited in Berry or Bowral. With a well designed and targeted social media business sales campaign we are able to turn these memories into a real possibility of a sea or tree change.
Expectations of a post COVID exodus from Sydney to the Southern Highlands and the South Coast have been very high. According to Domain, year on year house prices have risen almost 50% year in Kiama and 37% in the Wingecaribee Shire (The Southern Highlands) supporting the regional migration theory. The Centre for Population has forecast 38,900 people to move out of Sydney in 2021-22, with the bulk of these expected to move to regional areas in NSW. Whilst this should represent an economic benefit to the regions, as business brokers we are most interested in the number of potential business buyers amongst these domestic migrants.
With highly paid and professional job opportunities in the regions limited compared to the big cities, it is reasonable to expect that some of the people relocating will look for a business opportunity to provide an above average income. If they have sold a property in Sydney or Canberra, even with the increase in house prices in the region there is a high likelihood they have some capital to invest.
At MMJ, two recent business sales of a Blind and Awning Installer and a Busy Pizzeria were made to Sydney professionals moving to the South Coast. Buyer enquiries from Sydney and Canberra have continued at above normal levels and we expect more sales to buyers from these areas through 2022.
International Migration – Regional Business Investor
With the reopening of international borders after almost 2 years of closure, it is reasonable to expect there will be a backlog of international migration applications. Amongst these will be applicants for Business Innovation and Investment Visas. The important news for regional business owners is that the criteria for consideration are favourable for business migrants looking to invest outside the capital cities.
In particular, the business investment that the applicant is required to make is only $300,000 in regional NSW versus $500,000 for a Sydney business, and additional target industries are included for the regions.
We are starting to field enquiries from buyers in this category and expect this to gain momentum in coming months, especially in areas such as supermarkets and manufacturing.
The Next Steps
With these four strongly positive factors in play, we see 2022 as the perfect time to list your NSW South Coast or Southern Highlands business for sale. It is still important to properly prepare your business for a successful sale.
Start by ensuring all your financial information is up to date and that the benefits to a new proprietor are clearly demonstrated. The most critical next step is setting the right asking price for your business. At this stage of the selling process we highly recommend engaging a professional business broker with extensive knowledge of the region your business operates in.
Your broker should offer a complimentary, customised business appraisal that indicates the fair market price for your business.