What Factors Impact the
Value of a Business in New Zealand.

Former years financials are also very important as patterns can be formed, and is something buyers look for. Is the business revenue and profitability on the incline or decline? Is it consistent or patchy?

Aberrant years that are one-offs or recessionary periods, such as we have recently had, can be justifiably de-weighted when we look at the numbers. We are doing this quite a lot lately, depending on the industry, and buyers are accepting of that. Most business owners suffered at least some upheaval over the Covid or the post-Covid period. A few fortunate ones did quite well.

Here are six other important factors we consider:

1. What’s your Gross margin looking like and how does it compare to industry norms. What return on investment does your business provide for, and what is the ability of a buyer to raise debt on the historic cashflows, this is important because a large proportion of buyers will leverage their purchase against some cash or other equity.

Anecdotally, after the 2024 recessionary year when the banks were firmly closed to commercial lending, it was a stark contrast during 2025 to see the banks open their doors up to commercial lending again, with several banks presenting at our Barker sales meetings touting for business. Is your business bankable?

2. Market sentiment, economic factors, industry trends and competitive dynamics, where does your business sit? Is the industry heavily regulated? What are the barriers to entry?

There is a big difference in regulation between a childcare centre and a roofing business

3. Tangible assets: How long can a new owner rely on the business assets to generate cashflows, when will replacement be necessary, has there been any recent capital reinvestment? How much stock do you have on hand, is it more than two months?

We had a situation more recently with a cleaning company that imported a range of cleaning products that they also wholesaled nationally to other cleaning companies. The issue being that to get the great price they had to import container loads and had a years’ worth of stock on their books. To get the best value for the vendor client we had the purchaser contract to buy the incremental 10 months’ worth of stock that fell outside the one to two month “usual course of business” stock holding. They paid for the stock over 10 months which both parties were happy with.

4. Property and Leases: Is there a long-term lease in place that provides for surety of tenure with periodic rights of renewal that also provide for relocation flexibility? Is the rent a market rent?

Having a good lease in place on standard commercial terms is a big plus for buyers. If the leased property is fit for purpose with room for expansion, then 15 to 20 years remaining tenure with relatively frequent rights of renewal is seen as optimal. The buyer prepared to pay the highest price may be happy to stick with the existing premises and like the long tenure available, or alternatively the buyer could be a larger business that will merge your business with theirs, and therefore a short or medium term right of renewal will be key for relocation. Having flexibility is key as it opens up the buyer pool, creating additional demand for your business.

5. Customer and supplier diversity: Is your supplier base diversified or reliant on a small number of key partners. Are there contracts in place.

We just sold a business that had been operating with the same founding owner for 30 odd years, a really good business but as all the contracts for work were on a monthly rollover basis, nothing fixed term and all based on merit, this was off putting to a large number of prospective buyers.

6. Management and systems: Owner-dependant operations are less valuable. Managed businesses with systems, processes, governance, and a capable management team ensuring the business operates efficiently on a day-to-day basis are in greater demand.

An example here is that we had a telecommunications business that we listed as a “fully managed” business for $1.2m. Within 9 days we had received 42 enquiries with 2/3rds attracted by the fact that there was an established management team in place, and they could invest and then focus their efforts by working “on” the business rather than “in” the business.

Your business may not tick all those boxes, and that’s ok. Reasonable buyers, the ones that have been out there looking for a while and know the ropes, do understand that it’s a hard road finding the perfect business. Every business has its pros and cons, so don’t be too concerned, we can provide guidance and there are often measures that can be put in place to improve the attractiveness of the business proposition, and ensure we attract interest from a wide pool of buyers. It’s well worth the time spent, even if that means delaying taking the business to market for a period.