Investors have cash to snap up firms
Fewer salaried professionals are becoming businesspeople as fewer companies are going up for sale in a good economy and when they are, it is mostly investors who are buying them rather than white-collar executives seeking self-employment.
Hong Kong Business Intermediary, the city's largest small-business brokerage, saw transactions drop 10 per cent to 117 cases last year although the average transaction amount jumped by nearly a third.
The company's founder and chief executive, Edwin Lee Kan-hing, said this reflected an improved economy and job market as entrepreneurs were less likely to sell their businesses in a good market. 'More buyers nowadays are people who are looking for investment opportunities rather than sacked middle-aged executives who failed to find a job during the downturn in 2009,' he said.
While there are fewer businesses up for sale, average transaction amount for the 117 cases the company handled rose 30 per cent last year from 2009 to HK$340,000.
One reason is that investors - who made up more than 25 per cent of the firm's clients - have more cash than executives made redundant. Lee said he expected to handle even fewer cases this year, about 100, with the economy continuing to rebound.
'Because of the minimum wage law that will come into effect in May, those interested in starting businesses will adopt a wait-and-see attitude, possibly pushing the number of transactions to a new low around March and April, but we are optimistic that the trade will flourish again in summer when they realise that it hasn't had a big impact,' he said.
Lee said small businesses had already been paying high wages to draw talent and as they hired far fewer people than corporates, the impact of the new law on them should be limited.
Lee's firm handles about 200 businesses for sale at any time of the year and gets more than 550 inquiries every month.
Established in 2001, it has seen a constant change in consumer tastes over the decade, and for those who wish to be their own bosses, Lee has one advice: elderly-related themes.
'Paper offering retailing, for example, has very, very high profit margins. Customers do not compare prices for these products or ask for brands and costs are extremely low.'
There are a few such businesses for sale in the market but Lee also suggests other businesses such as maid and caregiver referral agencies or shops selling medical products and accessories for the elderly.
Last year, cafes, bars and restaurants remained the most popular businesses for starters, followed by tuition schools and play group organisers. Video shops were on their way out.
In light of the coming contraction in business, Lee's firm plans to launch new services such as selling businesses along with the premises.
'Rent is always the biggest problem for a business. If one can't earn enough to recoup the investment in two to three years, they may never will because rent increases could be really drastic,' Lee said.