Quick Market Update

Quick Market Update

 

I have had a lot of people message me recently about what is happening in the market at the moment so I thought I would put up a quick post just in case you have been wondering the same thing.

 

Firstly I want to apologise for the radio silence in the Exit Group recently, like many others, when COVID hit we lost a lot of our business overnight. We went from the final quarter of the financial year looking like it was going to be our best quarter ever to a complete nightmare all in one weekend.

 

After a lot of scrambling and adapting our own business alongside the rest of the industry we are back on track and we are busier than we have been in many years. The combination of pivoting the business and then trying to keep up with huge demand has been my priority and this has not left me as much time as normal to be posting in the group. Hopefully we are all getting back to some sort of normality now so stay tuned.

 

As always please let us know what you need help with, myself and the GSE team as well as the community are always happy to help if we can.

 

The Current Market

 

Buyers

 

Over the last four weeks we have seen the number of inquiries on listings increase to higher levels than in the last three years. On several occasions recently we have generated more inquiries in a day than we did in a week prior to COVID.

 

There are a couple of things that I have put this down to. Firstly there has been some organic growth due to people finding themselves out of work, some with a payout that they are considering putting into a business.

 

There are also a lot of people coming into the market who simply don’t want to go back to the office and are keen to get into the industry.

 

Secondly we have mixed up our marketing a bit, for those of you that use FB and Google Ads you may have noticed a big drop in the cost per click for ads during Covid. Because less people were advertising this cost dropped significantly so we ramped up our ad spend and it seems to have paid off.

 

Buyers at the moment now seem more confident to take action and although there is some concern over a second wave this is not stopping them from making offers. If you have managed to negotiate a rent reduction during Covid then there is less room for objection as you can demonstrate that you have a supportive landlord. If you have continued to trade through COVID then this will also help you to overcome this objection.

 

Are buyers just looking for a bargain at the moment?

 

There are certainly people looking around to take advantage of other people’s misfortune after COVID. To be honest this is the case most of the time, you always get people looking for low cost businesses and some people just either don’t see value ot they just don’t want to pay for goodwill.

 

The good news is that this percentage of buyers has not really increased, we have movement in all price tiers right from the small starter business right up to the top end.

 

Sellers

 

Last week for the first time since we started the business we advertised for new listings. Pre Covid we were swamped with people looking to sell and now we are finding that people are reluctant to sell.

 

Most of the conversations that we are having with who people holding off from selling are around the current government assistance, increased sales and/or profit and the feeing that now is not a good time to be selling.

 

The listings that we have on the books at the moment are generating a lot of offers and we have had eight businesses go under offer in the last three weeks (two were rescued deals that fell over when COVID kicked in).

 

When are most people looking to sell?

 

Most of the people that we have spoken to about listing seem to be holding off until September, many want to capitalise on Job Keeper payments and short term rent reductions negotiated as part of the code of conduct.

 

The last quarter of the (calendar) year is generally when a lot of businesses come to the market and at this stage it looks like 2020 will be busier than normal

 

I hope that has given you a bit of perspective on the current market, I am interested to know your thoughts and experiences in what continues to be a very interesting time for the industry.

 

When did you last Google your Cafe?

When did you last Google your Cafe?

 
When selling your business it’s understandable and quite normal for your mindset to shift. When this happens your attention to detail can also change, managing your online and social presence can be one of the things that gets pushed to one side.
 

Even though you are considering selling or maybe already be on the market it’s really important that you stay on top of this and here is why.
 

Whenever we get a call from somebody about how they should go about selling their cafe one of the first things that we do is check out their online presence.
 
What we have noticed is that most buyers also seem to do exactly the same thing when they know a cafe is for sale. I find it quite easy to tell how somebody feels about their business just by looking at the type and frequency of posts on social media, the business information available online and recent reviews.
 

Think about it logically, if you come across a Facebook or Instagram account that has little or no recent posts, how to you think the owner is feeling about their business?
 

If you look through recent reviews and notice negative comments about service and products (especially unanswered comments) what kind if signal is this sending out about how engaged the owner is?
 

Many people trust the information delivered by Google about your business and unless you check it and update it it could be sending out the wrong message to buyers.
 

There are typically two main types of buyers that will be looking at buying your cafe and here is how they will see these problems differently.
 
 

The Buyer With No Previous Industry Experience.

 
When a buyer without any hospitality experience comes across a business with negative unanswered reviews or a lack of social media activity they tend to be concerned that the business is not a good option.

In the mind of this buyer they may be concerned about dealing with reviews about the product and service when they may not have as much experience as some of the staff that are currently employed.

This type of buyer is looking for a strong ready made business that they are going to get a good return from and will allow them to move into the hospitality industry in the smoothest way possible.

There is a strong upside to these buyers paying top dollar for a good business, demonstrating that they are taking over a well established and low risk business will lead to you getting a much better offer and quicker sale.
By maintaining a strong online presence during the sale process you are going to make your business look like a more attractive and lower risk opportunity to these buyers.
 
 

The Experienced Operator.

 
This buyer is somebody that recognises that turning an underperforming business around is going to be harder than starting from scratch.

Fighting against a negative reputation can be a lot of work so continuing to manage your online reviews and keeping your online presence in check will help to reduce the risk in the eyes of these buyers.

The experienced operator will be able to see the potential (for them) of your business in a clearer way than the person who is coming into the industry from elsewhere. With that in mind they will potentially pay a good price for your business if everything stacks up.

If these buyers find one or two things that seem like a red flag then they typically negotiate much harder than other buyers.

Because experienced operators know the work involved in running a cafe they are usually less emotionally engaged as the first timer who has always dreamt of owning a cafe. With this in mind it is crucial that you don’t give them any wriggle room to try and drop the price or walk away.

The Upside to staying on top of your online presence during the sale.

  • You increase the appeal of the cafe to both types of buyer.
  • The perceived risk to buyers is reduced.
  • You will most likely bring in extra sales by posting regularly on your social media platforms.
  • You are putting out the image that you are fully engaged and not in a hurry to sell, even if that’s not the case!
  • You are adding to the goodwill of the business and giving yourself more positives to discuss with potential buyers.
  • The process of posting more frequently on social media may even help potential buyers to become aware of your cafe for the first time.
  • If the Increased activity on social media increases business this will help the cafe present better when you have buyers looking at it.

Action Steps

  • Google your business and check the first 10 results, is everything that you find up to date?
  • Check your Google Business listing, is this information correct?
  • Try and post on your social media platforms at least once a week. (we want people to almost find it hard to believe that you are for sale).
  • Check your online reviews and respond professionally to all of them. Don’t get emotionally drawn into any negative reviews, take a deep breath or sleep on it and post a response explaining your side and apologise if you got it wrong.

 
As hard as it is, when selling your business you need to keep running it as if you’re not selling.

If you can ramp up your marketing and online activity you are going to make the business look more appealing from the outside and as mentioned above make a bit of extra cash on the way out.

I hope this encourages you to review your current online presence and to take some action that may be needed. As always if you have any questions about preparing your cafe for sale or the sale process feel free to get in touch.