Trades businesses are commonly bought and sold in Australia, but with some difficulty and at low price-earnings multiples.
Why? Well, there are some barriers to entry to ownership of a trade business that disqualifies most business buyers. This is because a buyer usually needs a qualification/ skill which takes four or five years to obtain via an apprenticeship.
Secondly, it is common that many tradesmen in their younger years who may be interested in owning a trade business such as a plumbing firm or an electrician, do not have the collateral or financial to actually fund and buy a decent trade business. In other words, they cannot afford it!
The third factor or market force at play in trade-related businesses is that in the boom states of Western Australia, Queensland, and the Northern Territory there is exceptionally high demand for skilled tradesmen and the wages they are capable of earning are very high indeed. It is not unheard of for a skilled welder working in the West Australian resource sector to be earning one hundred and fifty thousand to two hundred thousand dollars a year.
Sellers of trade-related businesses need to understand that when selling and pricing their trade businesses for sale that they are competing with the job market for the attention of tradesmen who may be prospective buyers. The trade business for sale has to put forward a proposition that beats the proposition of the buyer not buying a business but instead remaining in their wage and salary position.
Remember, the tradie may have no worries, earn more and work fewer hours by remaining an employee, whereas he may have more worries actually being the boss! Therefore he needs to have a true entrepreneurial spark to make the giant leap from a trade business employee to a trade business owner!
Rent roll valuations are one of the most common valuations done by Business Valuer Network members. We value many real estate practices each year and have a broad database of