Demand is outpacing supply in the small business market, as sellers wait out tough trading conditions while buyer interest is at record levels.
Data from business brokerage firm ABC Business Sales showed new business listings fell 10 percent in the year ended March, compared to a 10 percent increase in completed sales.
Signed confidentiality agreements - a demand indicator - rose 30 percent to record levels.
However, the average price fell 8 percent from a year ago to $769,000, which ABC put down to an increase in sales below $1 million.
ABC said the supply imbalance was driven by business owners waiting for their books to improve before deciding to sell.
"Business owners have had reduced profitability and they're wanting to build that profitability up before they come to market," ABC Business Sales managing director Chris Small said.
"Profitability is one of the key drivers of a business' valuation."
He said some owners also felt the timing was not right due to economic conditions.
Those on the hunt for businesses were recently unemployed people and migrants, while some were looking for deals as some firms struggled.
Small referred to the unemployed business buyers as "corporate refugees", looking to buy firms to replicate their lost income due to redundancies.
New migrant arrivals, particularly from China, India and the Philippines, were particularly interested in buying businesses.
Demand was strong for childcare and aged care businesses, and import distribution firms, while there was a "high churn rate" in hospitality and retail.
Distressed assets - firms that were struggling - were also a small feature of the market, making up about 5 percent of sales, Small said.
In many cases, he said they would have "honest, robust conversations" with interested sellers about building up profitability to achieve their desired price or valuation.
"In some instances, and it's sad to say they just close the doors, and they can't keep going, and they don't get to sell their business because there's no value there," Small said.
Transport and logistics businesses drew in the highest average price, while hospitality saw the lowest.
This article was first published by RNZ
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