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Speaker 1: And the business of buying and selling businesses in this

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Speaker 1: country seems to be booming. New data this morning sales

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Speaker 1: are up twenty eight percent on this time last year,

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Speaker 1: average price is up three percent. Chris Small is the

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Speaker 1: managing director of ABC Business and is back with this

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Speaker 1: Chris morning to you. What's the role of the economy

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Speaker 1: at any given time or does this sort of thing

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Speaker 1: have a life of its own?

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Speaker 2: Oh, look, it's a bit of a combination of both.

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Speaker 2: Bo Well, I think you'll find reasoningly interesting is the

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Speaker 2: regional spread so in line with the sort of the

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Speaker 2: economy of the South Island was up seventy percent year

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Speaker 2: on year own business sales and Wellington, no surprise, down

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Speaker 2: to ten percent. So really there is a correlation because

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Speaker 2: we all know the South Island has been going to

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Speaker 2: a slightly better ten po than Wellington, and that's replicated

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Speaker 2: in the data we've got.

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Speaker 1: So if it wasn't for the South Island and farmers,

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Speaker 1: we'd be stuffed, wouldn't we.

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Speaker 2: I'm not sure that's quite fair. Auckland, why Kadom and

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Speaker 2: Bay a plenty we're up twenty percent, but I certainly

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Speaker 2: think you know, we could say about Wellington there's plenty

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Speaker 2: of room for improvement to their economy.

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Speaker 1: We're seeing listenings are down. Do we know why.

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Speaker 2: Yeah, we're do my and it's a reasonably prominent trend.

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Speaker 2: So in the last two years, if you use trade

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Speaker 2: me as a barometer, business listeners are down twenty percent.

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Speaker 2: And that's because when you talk to business owners, they're going, look,

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Speaker 2: we don't want to bring our business to market because

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Speaker 2: we've had two tough years. Our profitability is not where

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Speaker 2: we want to be. We want to build it back up.

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Speaker 2: Then we're going to come to market because obviously the

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Speaker 2: amount of profit your business makes has a direct correlation

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Speaker 2: to the value of the business.

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Speaker 1: Yeah, what about the categories and sectors? Who's doing well?

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Speaker 1: Who isn't well?

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Speaker 2: Interestingly enough, education, health and services are allowing for fifty

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Speaker 2: percent of money invest in businesses, so they're the most

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Speaker 2: popular sect is healthcare and healthcare that covers age care, childcare.

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Speaker 2: Those sorts of industries are really popular, especially childcare where

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Speaker 2: government funding plays a big part in the business model,

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Speaker 2: so that people get pretty comfortable they can go in

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Speaker 2: there and make a buck when the government's committed to

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Speaker 2: funding that sector.

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Speaker 1: Yields are good in general, it yields up by the.

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Speaker 2: Way, Yes, yep, they are just slight, so they're at

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Speaker 2: the top end of the range. So multiples are three

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Speaker 2: point six two, that's the top end of the range.

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Speaker 2: We've sort of bounced between three point three to three

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Speaker 2: point six. Yes, that's a multiple. So if you reverse

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Speaker 2: that that, that's a yield of twenty eight percent on

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Speaker 2: money invested in a small business.

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Speaker 1: The average price, I notice eight hundred thousand dollars. Does

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Speaker 1: that tell us anything? I mean, what do you get

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Speaker 1: for eight hundred thousand dollars. You can't buy a house,

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Speaker 1: so you can buy a business. So I suppose that's good,

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Speaker 1: isn't it? Yeah?

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Speaker 2: What is? We think about it? So, if you're paying

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Speaker 2: let's say three times for a business, that means that

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Speaker 2: business is doing approximately two hundred and sixty thousand dollars profit.

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Speaker 2: You know, you could buy a business with three or

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Speaker 2: four employees and it's spitting out to an ownA two

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Speaker 2: hundred and sixty thousand dollars a year. So I'd arguably

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Speaker 2: say that's probably money better spent than investing in a

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Speaker 2: investment properly, which is going to yield you about four

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Speaker 2: or five percent. But you know, New Zealand is slowly

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Speaker 2: cottoning onto that.

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Speaker 1: And do you break down the darta. I mean, how

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Speaker 1: many of this people people have never bought a business

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Speaker 1: in their life business? These are just people who buy

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Speaker 1: and sell businesses or add another business to a business

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Speaker 1: they've already got.

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Speaker 2: Yep, great, Queen, we do do that. So we do

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Speaker 2: the demographics. So about a third of purchases are people

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Speaker 2: who already own a business, so they're like, you know,

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Speaker 2: building up their portfolio as it were. And then you'd

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Speaker 2: say the other sixty or seventy percent is a mixture

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Speaker 2: of people who come out of corporate world, so they've

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Speaker 2: got good business experience but haven't actually owned a business.

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Speaker 2: And then you've also got a lot of migrants coming

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Speaker 2: to New Zealand from the likes of China and you're

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Speaker 2: in the Philippines. You could arguely say they've probably got

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Speaker 2: a bit of experience from where they're coming from and

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Speaker 2: buying businesses.

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Speaker 1: Exactly. All right, Always good to have you on, Chris

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Speaker 1: Chris Small, who's the ABC business managiner director. It's a

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Speaker 1: good time to be in business. It looks like it.

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Speaker 1: For more from the Mic asking Breakfast listen live to

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