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Is it a good time to buy a business?

By Richard K Parker

Republish: EasyPublish™
Published: 03Aug2009
Word count: 576
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If you have an entrepreneurial itch or have always wanted to buy a business, is now the right time for you to act? In the current severe economic downturn, your first reaction might be negative, but note that wherever there is a threat, there is an opportunity and that many people have become very successful in times of seemingly dire economic news. Whilst you always need to be prepared to work long hours and make sacrifices when you own a business, you will need to have additional resources and an even stronger temperament should you consider buying a business in a recession.

One of the largest hurdles you'll have to overcome involves financing. Never underestimate the amount of money that it takes to get a business off the ground and moving forward. Don't just include the figures that you come up with when you value a business, but project how much it would cost you to run a business for three years. Once you have a figure, quadruple it!

To achieve financing from a bank or other institution these days may prove to be an impossible task. The days of easy money are well in the past. You will need a very strong personal credit rating at the very least, but also probably have to put up a lot of cash and collateral. Banks and lending institutions are very wary these days, and it is not unheard of for them to cancel established lines of credit, even if the enterprise has a solid track record and credit rating. Make sure that you are not relying on the unknown too much.

Right now is the ideal time to negotiate seller financing so take advantage of the fact that banks aren't lending and keep the seller on the hook for your success by having them carry a balance of sale.

Make sure that you identify a need for the product or services that you will be selling. It is not enough just to own a business, your offerings must be in demand. While many people seem to think that business of all kinds will shrink during the recession, this is not necessarily the case. There are certain types of business that will enjoy an expansion during a downturn and there are categories of business that can be classified as essential. Maybe you should buy a business which is "bulletproof" through a recession?

Don't be afraid to think outside of the box when it comes to buying a business. You may find the solution that will fit your needs perfectly. Whilst many might feel that the type of business you're considering is foolhardy, you might consider that it represents additional opportunity. For example, whilst lawn care service might appear to be a luxury, many people are finding that they have additional pressures on their time and can least afford to spend hours in the yard themselves.

There's one particular thing to bear in mind in times of recession however - do not let emotions come into the decision-making process. Use your head and make sure that when you are ready to look at a business for sale, you have the right fundamentals in place, can finance or have definite access to finance to ensure that the business can exist for at least three years. Be as diligent as possible when it comes to assessing the absolute need for your product or service, in bad times as well as good.

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream of buying a business. Want to find out more about business buying strategies that really work, then look no further than=> http://www.diomo.com/

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