A New Year To Buy A Business and Opportunities Galore!

I hope you had an enjoyable and peaceful holiday. It is always a good time to regenerate the batteries, and focus on life’s important issues like family and friends. Too bad those priorities seem to shift for many people as the year progresses and we all get caught up in life’s daily routine and accompanying ancillary garbage.

I am neither an economist nor psychic, so I will refrain from making any predictions. My only hope from a business perspective is that we can revert to a more normalized degree of confidence in the economic landscape.

Business sales suffered through a very rough year in 2009, and deal flow remains off of prior year’s levels. However, I truly see the present-day market as an opportunity for buyers to purchase a business at unprecedented terms. But to do so, one ingredient is paramount – buyers need to take a step back and analyze potential businesses for sale from a high-level perspective, rather than a short-sighted view.

What I mean specifically is that it is highly likely that most businesses a buyer may consider purchasing will have now completed a second difficult year. You must dig past the urgent issues of any recent declines and spend time accessing the important ones of what the future will bring. As I told you, I am not a psychic, and so I avoid getting delusional about the future of any business for sale that I consider buying. I would always rather err on the side of conservatism in determining whether the immediate past performance is sustainable instead of dreaming about the allegedly opportunistic things I can do with the business in the future.

However, in the current times, it is important to take a proper approach to what the future holds. I do not mean for any buyer to hallucinate about the changes and improvements they think they can make, which often does not materialize. Rather, understanding what specific events must happen to get a business back on track needs to be analyzed. This is not a matter of simply blaming any past decline on the overall economy. That is far too simplistic an excuse. Instead, you need to determine what is happening within the guts of the business such as learning:

How are the customers themselves performing? What external factors have contributed to any past decline? Are these issues that can be easily resolved? If so, when? If it is an “anyone’s guess” answer, then you may want to stand clear. It is far better and has proven to be infinitely more plausible when the owner can be responsible to dictate and manipulate the results. So you need to determine specifically what it is that you can do to guarantee the business will be sustained, and then grow under your ownership.

This comes back to what I have been teaching and preaching for two decades to business buyers. This is not the time to try to be something that you are not. A hard core and brutally honest assessment of your strengths and weaknesses is paramount in this endeavor. If you do not marry your best strengths to a business, no amount of hard work, effort, enthusiasm or confidence will make up for a shortfall in the core skills required to operate, sustain and build it.

Conversely, when you apply whatever it is that you do best to a business that requires that specific talent, the business will ultimately flourish, regardless of the short-term economic climate. And with the current market conditions, you can easily leverage the deals terms way beyond normal purchase prices and structure an incredibly favorable purchase once you know how to do it.

Unfortunately, January always sees the influx of the “New Year’s Resolutioners” who start out focused like laser beams on buying a business, but whose enthusiasm dissipates over time. Do not let your objectives flame out. It is a phenomenal time to buy a business so take advantage of the marketplace.

On a final note, I want to thank the wonderful folks at BizQuest for allowing me to contribute to this forum each week. I also want to wish all of you a year that is jam-packed with good health and happy times. I look forward to our continued discussions.

Comments

[Omar Abu-Nie]

I very much appreciate your article. There is a tendency yo follow the "latest news" and get trapped into the ideas that everything is "going bad" and "down." It is true that many things are happening everyday, just like any other day. That's the cycle of the environment.

There are keys point you made, especially the one about strengths vs. weaknesses. I really liked that one. Look forward to reading more!