Why is This Still A good Time to Buy a Solid Business?

Although there is rarely a true time where the business buy/sell marketing is a seller’s market, the ebb and flow based on the economy is either a stable market or a buyer’s market. Right now, we are still in a buyer’s market and it will be, in my opinion, for at least another year as far as the economy is concerned.

BUT, more importantly, when the economy clears then you will see a good 3 years or so of the market being flooded with decent to great businesses for sale from the baby boomers ready to take their opportunity to get out. Lots of businesses for sale means buyer power.

That doesn’t mean some rare sellers won’t see some sweetheart deals here and there, but for the most part it means that most items surrounding an impending deal are leaning heavily towards the advantage of the buyer.

So are you thinking “if no loans are available still, how can this be a buyer’s market?” Glad you asked.

The truth of the matter is, banks rarely play a huge role in any deals under $500k, which makes up the majority of sales involving privately owned business. Most of these sales are centered around down payment money from a buyer and a note held by the seller and/or some kind of an earn out deal for the rest of the money. If a bank did get involved, it would be for a small portion of the deal value. You need to understand that it is extremely rare for a bank to be involved and the seller does not have to hold a note as well as play second fiddle to the bank as far as payments go.

Any seller not in a position to, not willing to, have a good chunk of skin in the game is sadly delusional and as a buyer you should steer clear of that kind of a deal structure. Know ahead of time you will need a decent down payment and that getting a bank loan is out of the question. The seller ALWAYS needs to have skin in the game and right now, more skin than in a better economy.

Keep in mind that although a buyer may be able to get a business for a SLIGHTY undervalued price right now, that is not where the buyer power really exists. Many of the sellers are trying to dump a dying business before it completely fizzles out so they are low value plays to begin with.

Since many sellers of solid businesses are deciding to hold on to their business while the economy is still leveling off to make them better and increase their value, there are not as many good business out there as you may think so the price tags should be lower (but some delusion buyers don’t understand that and those are another group to avoid).

The real deal power is that you won’t need to put as much down now as you would be required to in a better economy and you can get much more favorable seller notes including the interest rates they bear and the length of time to repay. Same goes with an earn out situation.

The bottom line… as always preparation is the key. Know how much down payment money you have to play with, have a solid understanding of the type of business and industry you want to buy into, and have some scenarios ready to put together a payment plan should you find a business to make on offer on. If you can find a good business for sale, this is still a great time to do it. Just don’t go into it thinking you will be putting down peanuts and going for a bank loan. No matter the economy, it’s just not that simple.

Super bottom line…. Get help. Seriously. It only takes a tiny mistake in a deal to turn a venture into a quick disaster and not knowing what you are doing can make EVER pulling the trigger an impossibility.

For a measly investment you can learn a lot about the process and get professional tools with this business buying package. Or take it one step further and actually hire someone (you know where to find me) to help you in some or all phases of the process. You will most likely save on the deal 2 to 5 times the money you invest in that help.



Best of luck in your business buying success-

The Business Buying Guru