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Business-sales market analysis & advice for overseas buyers

Interview with...

Graham Long, Small Business Sales
Topics covered:
State of the lending market, why the mining sector is attractive and what investors should look for in mining businesses, advantages of buying a business versus starting one up, advice for overseas buyers
10 years as a real-estate agent before specialising in business sales
Licensed real-estate agent, member of Australian Institute of Business Brokers, registered business valuer with Australian Institute of Business Brokers
Beachmere, Queensland

BusinessesForSale: Three years on from the onset of the global financial crash, how's the lending market looking for a small business for sale?

Graham Long: Funding has virtually dried up since the global financial crisis. Sales of small businesses and lending to small businesses in general is restrictive and almost impossible unless secured by property, and even then lending ratios are only around 50%. 

New Australian 'responsible lending' legislation and changes to workplace relations have created uncertainty and effectively curtailed small-business activity.

BFS: So it's still fiendishly difficult to raise finance then?

GL: Almost impossible. Unless substantial research and planning has been undertaken at considerable cost, then lending is very restrictive, even when backed with property as a security.

BFS: Are there any sectors investors should keep an eye on or avoid?

GL: Lease costs and labour costs are the biggest 'fixed' costs and limit small-business profits. Also, any businesses in an industry that cannot secure premises at an affordable rent have limited futures. 

Like to be autonomous and usually have a view that they can deliver a better product or service than others

Sectors associated in support of mining have a good future.

BFS: And what should investors look for in potential acquisitions in the mining sector?

GL: Buyers should look out for future growth. Entrepreneurs should also check what products and services are required by mining companies to support their activities.

BFS: Do you have any advice to offer overseas buyers who are considering entering the Australian market?

GL: Firstly, seek professional assistance from experienced business brokers to act for you, and be prepared to pay them. Advice from those in the industry can save thousands of dollars in mistakes by those who don't understand Australian culture and business activities.

My second piece of advice: be careful with lease costs, terms and conditions. And thirdly, determine where you want to live before committing to buying a business.

BFS: What are the advantages and drawbacks of buying a business over starting your own?

GL: The principal advantage is immediate cash flow. The main drawback is the time and money spent on research; this includes finding and securing a premise and obtaining funds.

BFS: What kind of people buy businesses? 

GL: Small-business buyers are people who have been in business before and understand the value of cash flow. They like to be autonomous and usually have a view that they can deliver a better product or service than others.

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