Beginner’s Guide to Buying a Resilient Business

Before 2020, few people considered the possibility Australians would be in some form of a lockdown for months on end. COVID-19 changed the equation forever, and pushed many businesses to the brink.

These challenging times also created new opportunities, and many businesses and industries have proved their resilience. New buyers have found success and achieved their ownership dreams, and you can succeed in business too – even in a disruptive economy – if you know what to look for.

To help you hunt out the most durable opportunities, we asked the experts what buyers should be looking for when it comes to buying a pandemic-resistant businesses.

Enduring through upheaval – the industries to look out for

While the pandemic and tough economic times hit some industries hard, others fared much better.

The majority of businesses that did well had a few things in common, including;

• the ability to function with limited face-to-face contact, especially those not chained to a bricks and mortar premises;
• the foresight to pivot quickly to working from home or online;
• those selling critical goods and services;

Some industries that did particularly well over the last couple of years are:

• Online services – a business that can be run from behind a computer screen has the potential to be resilient. From counselling and remote fitness classes, to graphic design, accounting and virtual tutoring, finding and servicing your customers online proved successful for many businesses.
• Food and convenience stores – people always need to eat. While lockdowns affected many food providers, those that pivoted away from seated eateries to hole-in-the-wall service, take-aways and deliveries fared well. Online outlets such as bakeries, bulk-foods, fruit & veg boxes, and pre-made meals also made their mark.
• Mobile businesses – not being tied to a store front, and getting to where your customers are made coffee and food, pet groomers, cleaners and other van-based businesses a good choice.
• Dropshipping businesses – with no need to store or stock specific products, dropshipping businesses thrived. By purchasing items from a third-party and shipping them directly to customers, these businesses can function without the need for in-person contact, a warehouse, or a storefront. Dropshipping businesses found success in fashion, retail, homewares, electronics, and a variety of other areas.
• Freight and delivery businesses – people wanted to shop, but couldn’t go out…so they shopped online. The resulting boom for the courier and freight industry could prove to be semi-permanent, with many people changing their shopping habits for good.
• Essential services – there are things we can’t live without. Appliance repairers, plumbers, electricians, couriers, healthcare providers, and other critical services will always be in demand.

What the experts observed – trends you should take note of

With Covid came the work from home mandate (except for essential workers) meaning that for many Australians, their homes became their workplace. The way we worked, the way we thought about work, and the way we thought about things beyond work all shifted to the little things: where we spend our time and what do we spend our money on.

Home improvement, home gyms and pets

In the early days, employers and employees alike were focused on setting up workers to work from home, and that meant buying the furniture and equipment to support their situation. Over time, attention turned to making general home improvements; people noticed things they wouldn’t normally notice (or be bothered by), and they wanted to make the space – and themselves – feel better.  In addition, many families and those living alone also bought pets for company, which saw the pet product and service industries thrive.

Mary Aldred, CEO of the Franchise Council of Australia says that during Covid, home services businesses and mobile pet grooming have just hit it out of the ballpark in terms of their performance.

“With people sitting around at home on a video call while looking at their wall thinking ‘oh gee that needs a repaint’ or ‘I’d like to renovate my kitchen’, home services brands met that demand,” she says.

E-commerce for discretionary income spending

Now with extra money in their pockets thanks to the shutdown of many industries including travel, entertainment and hospitality, Australians shifted their spending online. Businesses that had an e-commerce presence were able to step up and benefit from this trend.

Things like home gym equipment, home furnishings and equipment, and incidentals that might have previously seemed a luxury (think beauty, lingerie), were now deemed more of a necessity. Treating yourself to a new lipstick to boost your mood on the next Zoom call didn’t seem indulgent anymore.

The message here for businesses moving forward is think about your technology platform, your online presence and marketing abilities, and how you can service your customers online.

“Any business that uses drop-shipping, or can easily trade online with stable supply chains, logistics, and shipping capacity will experience minimal disruption. Start thinking “clicks instead of bricks,” says Mary.

Those that innovate, survive

If online is not a match for your business, ask yourself how creative you could be to pivot your offering if usual operations weren’t possible.

“Through lockdown, some companies partnered with other businesses to do deliveries. Some service or trade businesses did things like installing Perspex screens to protect retail workers,” says Mary.

“If you can’t predict the future, create a culture in your business that can foresee and anticipate. That means building-in resilience, the ability to pivot to other ways of doing things, and continuing to innovate.”

Disruption due diligence – how to assess a business opportunity

Undertaking thorough due diligence is a big part of assessing any business opportunity, but more so when it comes to assessing a business that survived a pandemic.

Mary’s advice is to carefully consider the impact of a major disruption when doing your due diligence, too.

“Find out how the business or industry performed during COVID. Look at pre-pandemic times to see if the business was doing well before any external hardships. Check how income was affected, how it operated during restrictions, and how quickly it recovered once restrictions were eased,” she says.

It also makes sense to think about whether customers will use your products or services during hard times. How necessary is your product, what price point are your positioned, how likely will consumers be to need or want your offering in times of economic hardship? Factor this into your planning.

Questions to ask – what you need to find out to uncover a durable business

Beyond the standard important questions to ask during your investigations, here are some additional ones that can help you work out the potential resilience of a business:

• Is it an essential service? Can it still operate regardless of significant disruption?
• Does the income rely on face-to-face interactions?
• Can I work from home and successfully make a profit? Can any staff work remotely, and how will this affect business?
• How would you manage needing to close your bricks and mortar store or retail space? Would the business still need to pay rent? If so, what impact would this have?
• If it’s an existing business, was it doing well pre-pandemic, as well as during?

Talk to a professional – who you need on your business buying team

Once you’re further along the buying journey, Mary recommends getting advice and insight from a lawyer and an accountant who deal with business and franchise sales every day. They’ll have considerable knowledge about how a particular business is likely to fare during uncertain times, and how to navigate your obligations during uncertain times.

“Things like relationships with your landlord or supplier…your Fair Work obligations if you’re employing people…other ongoing costs. It is so important to get advice from qualified people who practice in their field of expertise,” Mary says.

Stephen Giles, a lawyer with Norton Rose Fullbright, says the advantage of working with a professional advisor is they can help navigate the complex financials that impacted businesses during Covid, which may not be overly clear.

“If you’re looking at COVID-affected financials, disclosed information may be inaccurate, as it could include government payments and/or discounted expenses,” advises Stephen.

An expert will help you unpick any of these before you sign on the dotted line. That could save you a lot of stress and pain in the future.

The most important factor to consider – it’s all about YOU

It’s true that some industries and businesses are more immune to disruption and uncertainty. But it’s also true that generally, the most important factor is…you.

According to Stephen, it pays to be honest with yourself if you’re buying a business in an uncertain environment.

“Prospective buyers should consider whether they have the resilience to cope with the inevitable new challenges that will arise,” he suggests.

While many businesses were able to successfully pivot or change their offering, some did it better than others. Much of that comes down to the attitude of the owner when faced with such a challenging situation.

“Self-assessment is probably the most important aspect of the purchasing decision,” says Stephen.

Plus, there’s never a perfect time to buy a business, pandemic or not. So whenever you decide to jump in, the most important factors are to find the right business for you, and make sure you’re confident in your ability to run it.

The bottom line – where to go from here

Buying a business during disrupted times often involves uncertainty.

“There’s no play book for navigating a pandemic,” says Mary.

But that doesn’t mean it’s impossible. On the contrary, doing your homework about a business and industry will help you unearth some great opportunities.

And if you have the right attitude to navigate difficult times, you’re already halfway there.

The rules haven’t changed completely, either. A business with good bones can still give you the success, freedom, and fulfilment you’re looking for…if you have a bit of drive and passion.

“The fundamentals remain as relevant as ever,” says Stephen.

Ready to find a durable business for yourself? Search for business opportunities now!