Your Plans To Buy A Business Should Heat Up Now

The seasonality in the business for sale market always surprises me, although, after twenty years, I should probably be used to how people go about the process to buy a business.

What I mean specifically is that in certain periods of the year, the industry seems to go into a funk where activity declines significantly and for no good reason. While I can understand the usual summer attitude, I do not comprehend why, as the fourth quarter begins, buyers seem to get away from their focused approach.

Interestingly enough, we always see a flurry of activity in our publishing business right after every major holiday. I guess it has something to do with the fact that people dread heading back to their jobs after a nice long weekend. These days it is a bit different as there are far fewer people who have jobs altogether.

Similarly, we see a huge increase in the number of buyers right after the winter holiday season. It is what I call the “New Year’s Resolutioners”, but I will leave that discussion for next month.

So here we are in December, in what has been a difficult year for many people, and certainly the overall economy. However, if your intention is to buy a business, now is truly an excellent period to ramp up your search, and not wind it down like most people do at this time of year.

The reasons are simple:

• Many prospective buyers take their foot off the pedal at this time of year. They are focused on the holidays I guess and so they put off their search for a while. This means there are less buyers in the market and therefore less competition.
• Next, as businesses enter December, they will certainly have their year-to-date figures available through to September or later, and no doubt you can tell how their overall year will end up with only a month to go. This is in stark contrast to looking at a business in the first quarter when sellers present their year-to-date numbers and try to convey what the balance of the year will look like. It is a complete guess at that early stage.
• It is also a timely point right now to fully compare 2009 figures to prior years to get a real sense of the business trends.
• Any seller who has had their business on the market for a while sees the New Year around the corner. If they are truly motivated to sell, they usually do not relish the idea of going through another year either operating or trying to sell it.
• Finally, for any buyer who began the year with a goal of buying a business in 2009, well, you had better hustle!

I have always believed that a contrarian approach works wonders in many situations. I defer to Warren Buffett as an example with his strategy of buying when everyone is selling, and selling when everyone is buying. Similarly, when the business for sale market is “winding down” and activity is grinding to a halt, it is to me, the ideal time for any prospective business buyer to move ahead full-steam. Even if you do not conclude a deal in the next thirty days, you are setting up to hit the ground running for 2010.

If you are serious about buying a business, then do not slow down now. It may be the ideal time to separate yourself from all the “lookers” in the market and put yourself at the front of the line. Opportunity comes in a flash and is gone in a second – don’t miss out.

As always, be sure to visit my website if you want to read some helpful articles or if need any assistance with buying a business.

Have a great week.

Comments

[Kipp Krukowski]

Richard - I agree that there is a "seasonality" factor in regards to buyers pursuing businesses. Being in the business for six years as a business broker, I also believe that in certain areas of the country, such as the Midwest where I reside, the seasonality is also tied to additional factors. I have analyzed our traffic over the years and surprisingly it correlates directly to the school schedule. In other words, it slows down around holidays such as Christmas and New Years, Thanksgiving, and Spring Break. In our area, most schools are off during the summer and since we truly experience the four seasons, people take advantage of the summers and vacation with their children or do other outside activities which takes away from time devoted to searching for a business. I also look forward to September because I consider it the start of the buying season after a three month summer slowdown.

[W3 Business Advisors]

I think with the way things have panned out in recent months seasonality and trends have kind of gone out the window. Many people are trying to cope with certain scenarios and often times purchasing a business seems like a good idea rather than looking for new employment.

[Lucy]

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Lucy