Find out why
The average value of a small business in London has fallen £20,000 in the last year, research by online business transfer agent Bizdaq has revealed.
The findings are part of a larger study which looked at nearly 7,500 small business valuations performed over the last three years, which found that the average small business in the UK is worth £90,000. This rises to £95,000 in the capital – though crucially for London-based businesses, is down on the £115,000 average seen in 2016.
The UK average in 2016 was £94,000, meaning that the drop seen in London is five times higher than the £4,000 drop seen around the rest of the country, and means a huge loss of value for the city’s small business owners.
This drop can be seen in two of London’s most prominent small business types, coffee shops and restaurants.
The value of a London coffee shop has seen a severe drop, falling by almost a third – from an average value of £92,000 to just £62,000 in a year – whilst restaurant values have dropped by a staggering £43,000.
Whilst the value of a restaurant in London was £140,000 in 2016, that value has plummeted to £97,000 in 2017 – signalling that either a drop in demand or rising costs is affecting small business owners in the capital significantly.
It’s not all bad news though. Café owners in the capital have cause to celebrate, as the value of cafes in the city has risen from £65,000 to £70,000 – meaning an additional £5,000 should they want to sell.
Sean Mallon, CEO of Bizdaq, said: “It’s frustrating to see that small businesses are reducing in value across the UK, leaving the nation’s small business owners with diminishing levels of return on their hard work and investment. In a period of economic uncertainty however, this is not unexpected.
“It’s interesting to see the differing values from region to region, and surprising how only short geographical boundaries can make a large difference to a business’ value. London in particular has seen a dramatic swing in values over the past year.
“A business’ value is in many instances tied to revenues, and particularly profit, so falling values may be indicative of a fall in these across the board, with a recent rise in interest rates putting further strain on the UK’s small businesses.
“Profitability decreases in a small business is often attributed to an increase in its variable costs, such a business rates or utilities. With this being the case, I would urge the government to work harder to relieve the strain on small business owners and allow them to make a fair return on their hard work. This should include allowing them to protect their investments through tax allowances when exiting their small business.”