ABC Business Sales Market Intelligence Report Dec 23 - Flipbook - Page 11
Privately Owned Business Yields
vs Other Investments
Segment
Capital Invested
$ Return
% Yield
Privately Owned Business Yield
$500,000
$142,857
29%
Investment Property Yields
$500,000
$20,000
4%
Term Deposit Yield (12mths)
$500,000
$30,000
6%
NZ Share Market Average Yield
$500,000
$15,000
3%
• The average pre-tax yield for investing in a privately owned business equates to 29%. The average residential investment property yield is 4%, term deposit 6% and the average yield from the NZ
Share market is 3%.
• Clearly, there is a material difference in the annual yields, with private business ownership returns being 500% higher than other investment segments available to New Zealanders.
• The 29% pre-tax yield for business ownership is based on the company being fully managed with limited input from the investor. The 29% yield is derived from the average business multiple which is
3.5x EBITDA. (1/3.5x = 29%)
• This analysis excludes any capital gains for business ownership or any of the other asset classes.
• It needs to be acknowledged that private business ownership has a higher risk profile than investing in the comparison investment classes but we do not believe the premium for investing in a private
business should be 500% higher than investing in property, term deposits or the NZ share market.
• Based on this data we expect business values to continue growing and more investors to realize this asset class can be extremely rewarding and lucrative compared to other asset classes.