Romantics, upskillers, strategists and investors; these are the 4 most common buyer archetypes we’ve seen this financial year.
How have these buyers changed since last year, and why does this matter to business owners?
Buying an established business is now more popular than ever as a wealth building tool, offering the strongest returns amongst other traditional investment avenues. From FY2022 to FY2023, we saw a staggering 46% increase in buyer enquiries. Based on the first quarter of FY2024, we predict that buyer enquiries will increase again by another 27.7%.
Here is what drives these archetypes to purchase:
These types of buyer’s value lifestyle benefits above all. Typical to industries such as hospitality, retail and tourism– acquiring an established enterprise that fulfils a lifelong dream, satiates creativity or allows for living in a scenic locale could not suit better.
Romantic buyers will still have lifestyle benefits in the forefront of their decision making, but the business must at least match or exceed their current income to make it a viable purchase.
This change is in stark contrast to Fy2022, where businesses that offered low returns, but other forms of appeal still flew of the market – occasionally causing bidding wars.
Romantic buyers today are more discerning when it comes to financial performance, lease security and asset value, as the potential risk of failure feels more consequential.
These buyers have capped earnings potential within their industry. Naturally, the next step towards career progression is business ownership. The prominence of these buyer’s corresponds with industry conditions.
Childcare Centres are the strongest example of this in FY2024. Wages are modest as an employee - but as a business owner, it’s a completely different ball game.
It’s a cornerstone service, heavily subsidised, with more government incentives rolling out each year. Owning a Childcare Centre is a very attractive proposition if you are already qualified and working.
Businesses that overwhelmingly attract ‘upskilling’ buyers are well positioned for success on the market. If the business is clearly advantageous over employment to a large portion of people, the demand will follow.
Strategic buyers are usually business owners themselves – looking to break into competitive new markets, aqcuire talent or expand their service offerings.
Currently these buyers are typical to industrial, services, and even premium hospitality businesses. The needs of strategic buyers vary significantly – all with their own metrics of what makes a good acquistion.
Businesses on the market that offer unique value propositions – such as exclusive assets, protected IP or a specialised workforce can be very fetching to strategists, but they will require a more thorough and tailored approach in dealings.
There is no lack of strategic buyers in FY2024, but the value they are after must be clearly defined and consolidated – any muddiness around this can reduce their confidence.
‘Strong cashflows and under-management’ is the mantra of a SME (Small to Medium Enterprise) investor. These buyers have increased almost trifold since FY2022.
Businesses such as laundromats are in the limelight as the investor’s top choice– almost becoming synonymous with “passive income”, which we feel is a somewhat mislead assessment. No business is ever truly passive like stocks or investment properties, but the typical returns on laundromats at 25-30% far outweigh the limited involvement required.
The core needs of these buyers are strong ROI’s, minimal risk and little to no working hours needed from the owner. Their primary objective is to build wealth – and they will not hesitate to put money down on a business that achieves this seamlessly.
If you can systemise your business to function in this way, it is sure to capture the imagination of these abundant investors.
While there are more players in the market to buy a business, their sophistication and access to expert advice has become more apparent.
Buyers today have access to an abundance of business knowledge at the tips of their fingers. They also have a lot of choice, as more and more successful baby-boomer businesses come on the market. If you are looking to maximise the market value of your own business, get a head start with:
Organised, digital record keeping
Systemised & documented operations
Growing your sales & profits
Minimising day-to-day dependence from you
It is also why enlisting a team of business sale specialists is so important - we know which buyers to reach, and what value they will see.