It's a seller's market for business sales as prices continued to go through the roof, fuelled by demand from returning expats flush with cash.
Prices paid for small-to-medium-sized businesses are up due to demand. Photo: 123RF
ABC Business Sales' latest quarterly report, showed the average price for general small and medium-sized enterprises excluding hospitality, increased 16 percent from $631,195 to $733,460 for the year ending July.
The average price for hospitality businesses was up nine percent from $185,479 to $202,774.
ABC Business Sales managing director Chris Small said there was unprecedented demand, coupled with low supply.
"We've got returning expats who are well capitalised and not necessarily looking to go back into their old career, which they probably exhausted when they were overseas.
"There's a lot of domestic and international capital circulating the system looking for higher returns and yields. And again, business acquisition is a good place to get those yields and returns," he said.
Business sales volumes were up 47 percent over the year.
"We found that Covid-19 has made a lot of people rethink their working and living situation. And again, this has resulted in business ownership becoming a more popular alternative to the standard salary employee option. And then of course, we've got the low interest rates, which allows people to borrow money at historically low rates," he said.
There has also been a 14 percent drop in new business listings.
"We are at historical lows as far as businesses coming to market, that is existing business owners are resistant about selling their business.
"So we've got less supply and high demand, so when good businesses do come to market, more than likely we've got four or five active parties who want to buy that business.
"Very much like the housing market, when you've got more than one buyer willing to buy an asset, you have a multi offer situation which leads to a higher price for that asset."
Small said the market has seen a mixture of both professional and private investors.
The latest data also showed private business ownership returns continued to be much higher than commercial property yields.
General businesses had an average of 29 percent ($212,703) return on investment, compared with cash invested in commercial property, which saw an average five percent ($36,673) return.