Lifestyle forces values down

CHANGING lifestyle trends and the emergence of franchising is pushing down the value of WA small businesses.

Small Business Development Corporation managing director George Etrelezis said, in the early 1990s, the lifestyle trend was towards people buying into seven days a week businesses.

This pushed small business values up.

“Now, the advent of petrol station-convenience stores and the like have started to push the prices down,” Mr Etrelezis said.

“Plus, increased competition is forcing business owners to work harder.”

Business owners are now starting to look at their lifestyle which has reduced the attractiveness of the seven days a week business.

However, businesses that operate five or six days a week are drawing greater competition from franchises and major retailers.

Abbott Business Consultants principal Steve Abbott said small retailers now faced tremendous competition from the three big retailers in the WA market.

“There are too many retail outlets per head of population in WA,” Mr Abbott said.

“The major shopping centres are expanding and are sometimes loathe to give a lease to an independent retailer.

“They prefer national names and franchises.”

Mr Abbot said there were only three protected industries now and one of these – newsagents – was coming under pressure.

Online Lotto looms as a major threat to small newsagents.

Through the WA Government’s recently launched multi-agency website, visitors can now check Lotto results online, so it seems a matter of when, not if, the game will be available electronically.

Mr Etrelezis said the online Lotto spectre was starting to raise some questions about the goodwill threshold in newsagents.

Despite the gloom of the retail sector, there is still strong growth in the services sector.

What is yet to be seen is the effect the GST could have on this sector. Currently services do not attract sales taxes.

Mr Etrelezis said there was also growth in some niche areas.

“One example of a retailer doing really well is All About Bread,” he said.

“This retailer is picking up on the trend towards home baking.”

Mr Etrelezis said new capital gains tax provisions might cause some people to hang onto their businesses for longer.

This could help to improve small business values a little.

Under the new CGT regime, business owners that keep their businesses for fifteen years and then sell to fund their retirement will not be subject to CGT on the sale.

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