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Buying a Business in a Recession

Posted by Richard Ludlow

Mon, May 23, 2011 @04:52 PM

 Why do we look at business values differently when the economy is not as strong as we do when the economy is thriving? The answer is simple; most of us cannot afford to make a mistake, especially one that will cost of hundreds of thousands of dollars. But is our anxiety really warranted. I say it is not!


When times are good businesses are selling rapidly and banks are quick to lend. We borrow freely, whether it’s our home mortgage, a line of credit  or an SBA loan to purchase a business. Just because the bank says it’s ok we take the plunge. But the reality is we should always value a business the same way regardless of economic conditions. But most buyers are way more skeptical in a bad economy when evaluating a potential transaction. They spend weeks instead of days pouring over financial documents, and they spend months instead of weeks in due diligence. Many buyers that I have spoken to recently have been looking for a business for over a year, some two years. Their real anxiety, though, is with themselves. Most buyers simply lack the confidence to be business owners.


If you are looking at a business to purchase, and it is represented by a professional business broker, the value placed on the business is going to be correct. If the value is right, and the terms for the purchase are acceptable, then the only thing holding buyers back must be self confidence. Whether the economy is good or bad, it really boils down to consumer confidence. I know several business owners that I could put into any business or Industry and they would be successful. Why? They are confident in their abilities. They won’t accept failure. They refuse to lose. If more business buyers had that attitude more businesses would change hands and they would flourish from the injection of new positive energy. Remember the old saying, “you can’t steal in slow motion”. If there is a business on the market for a good price, and with good terms, don’t wait until someone else has a chance to take the opportunity from you. Take the plunge. Just have the confidence to succeed!


By Brian Reifer, Partner

Topics: Selling your business, business valuations, business brokers