What A Year and What A Future For Buying A Business

I may be one of the most optimistic people you ever meet, but I must admit, I am glad 2008 is coming to an end. From strictly a personal perspective, my family has dealt with too many difficult health issues that my wife, young son, and father have endured this past year. Thankfully, they have faced them with great courage, and they will all be fine. It has been a year of stark reminders that health and family rank well above anything else on life’s priority list.

Thankfully, from a business standpoint, it was a very good year for my company. Typically, when the stock market is down, and layoffs are up, we sell a lot more of our guides for business buyers. Although my company has done exceedingly well, the economy obviously has not. Although we face some daunting global issues, I am concerned about a bigger threat: the complete lack of confidence that most people are expressing.

Since the time I bought my first company eighteen years ago, whenever the economy experienced a hiccup, regardless of its projected duration, there was always an overall feeling that any issues were short term. People were still optimistic. Today, the general consensus is different. It has been a tough year for many people, and if you subscribe to what the alleged experts say, it shall continue for a while.

In any case, I am still incredibly excited to see what January brings. It is generally a month when enterprising individuals come out flying from the gates, ripe with New Year’s resolutions and gung ho to buy a business. It is going to be very interesting.

Regardless of the greater economy, ultimately, the business for sale market will benefit from what we are presently going through.

There will have to be an across the board adjustment in seller’s expectations. Business brokers will play a large role in this as well. I have been teaching and preaching seller financed deals for nearly twenty years. Although our clients have been incredibly successful negotiating these terms, there are certain pockets where it has been shunned. In prior years, whenever I have written about negotiating seller financing, I would get blasted with emails from brokers telling me: “that is not how we do deals here.” Wow, how things have changed! Now, when I broach the subject, not a whimper is heard. The banks will not be opening their vaults anytime soon, and so in order to get deals done, sellers will have to finance the deals across the board. Spread the word - it is coming to your town! We are seeing more of it everyday, and it is just great!

The second set of deal terms we will see more of are performance-based clauses. Here too, I think it is perfect, and it represents what should be far more of the norm in small business sales than the exception. With many businesses in decline, sellers have to share more of the risk moving forward. This means however, that brokers will have to be more creative, open-minded and flexible. It is the only way to get marginal deals to the finish line.

We will also see a culling in the business brokerage field. The fringe brokers who do not bring value to the deal will have to find new professions. This is a good thing. While there are some excellent business brokers around, the industry has far too many individuals who do not possess the knowledge, skill, experience or sincerity to be in this industry. The attrition will eliminate the useless ones, and make the better brokers more effective.

“Inventory” can no longer be the mantra of the business brokerage field. Instead, focusing upon quality listings that can realistically sell, is the only viable strategy for business brokers. It is hard enough to sell any business in good times, so loading up with listings for the sake of subscribing to antiquated strategies espoused by old industry strategists, who long ago lost touch with the real-world, is a recipe for failure. Time is a broker’s greatest, and only asset. Waste it on garbage listings, and you won’t survive. The business brokerage industry is entrenched in legacy. Too many, have been doing the same thing, for too long. It no longer works. It reminds me of the old saying: “The definition of insanity is doing the same thing over and over again and expecting different results.” So heed the call and change – you will be the beneficiary!

The buyer pool is shrinking. With the decline in confidence, and less access to capital, the fringe buyers shall also fall to the wayside. This is a good thing as well. Hopefully, with changing attitudes and strategies, this will, in time, lead to more qualified buyers looking at more qualified businesses. That is ultimately the only way to create a flourishing market.

There are some great things on the horizon. The present economy will cause some pain in the near-term, but the business for sale market will, in the end, reap great rewards as a result. The current woes will lead to better days. It has always been the case; it always will be.

I want to thank all of you for what has certainly been an interesting year. I truly appreciate all the comments you have offered each week. A regular newsletter works best when the dialogue is reciprocal. I enjoy the discourse and debate. I never expect you to always agree with me, and I enjoy the opposing points as much as the positive feedback. I hope you have enjoyed my regular content, and trust that you have found some valuable information along the way.

I also want to thank the fine folks at BizQuest for allowing me to contribute to their website.

Have a wonderful holiday. From my family to yours, I truly wish you an abundance of good health, happy times, and prosperity in the days ahead.

For any of you sitting on the fence deciding whether or not you should be buying a business, I offer you the following: Caution is a prudent strategy, but you will never be successful waiting on the sidelines for your break. You must get into the game! You alone create your success or failure. Once you take full and complete responsibility for your future, you will be on the road to success. Don’t make buying a business your New Year’s resolution - make it your reality!

Happy Holidays!

Richard Parker
(Like what you read here? Visit my website to learn some great tips about buying a business)

Comments

[Fleemarkets]

Great article...sorry about your family health issues.

[Dylan Garland]

Imagine Richard thanking us!

No, thank YOU Richard for your insightful, topical, and always interesting posts in this blog and our weekly newsletter. You are a credit to your industry and a true friend to business buyers and sellers. We are honored to have established this partnership with you - which, if you can believe it, is going on 6 years now!

On a personal note, I continue to be amazed by your energy, passion, and sheer knowledge of this industry, not to mention life in general. I feel very privileged to have known you and worked with you for all of these years, and to consider you a friend.

Happy Holidays to you and your family Richard, and my very best wishes to all of you for the new year!

Sincerely,
Dylan (and the rest of the "fine folks at BizQuest")

[Kipp Krukowski]

Richard,
I think your article about the current business brokerage environment is dead on. What you are seeing and what you have written is exactly as I see 2009 playing out. Seller financing and earn-outs will play a much larger role than in the past across almost all industries. I also agree that there will be a shake-out of the fringe brokers. They will likely not be able to survive. It is a difficult industry to begin with and knowledge and experience will be more important than ever to help creatively bring a buyer and seller together. Good luck in 2009 and thanks for the great posts!
Kipp Krukowski, MBA, CBI, CEPA
Confidential Business Sale, Inc.
www.ConfidentialBusinessSale.com

[Richard Parker]

Thank you Dylan for your wonderful comments. I truly appreciate your kind words. Six years??? Really?? Wow, that is crazy. It is just delightful to work with you and the BizQuest team.

Have a great holiday.

Richard

[Websites for sale]

Richard,
Thanks for a great blog I like reading because it is informative, timely, honest and one I relate to. I am seeing the same patterns in my website only brokerage business, and as you mention the end of the year and January - March often brings in significantly more transactions. There is always great opportunity in the midst of chaos and fear in the market place - that is where a shrewd and patient buyer can make tremendous deals.
I appreciate my 'virtual' relationship with you and our mutual respect within our own specific niches. I am hopeful to see the industry shake off the mediocrity as well. We are also raising the bar of our listings to insure we only represent the cream of the internet crop that wants representation - quality over quantity is the focus for us in 2009.
To a great new year - cheers!
David Fairley
www.websiteproperties.com