Choosing A Business

Over the last couple of years, if I had a dollar for every time a prospective business asked me “what is a recession-proof business” I would probably be retired by now. My standard answer has always been: “It’s ALWAYS a good time to buy a business” to the latter.

I categorically believe in my response but interestingly enough, the common question often proves to be enough of a hindrance to prospective buyers to prevent them from completing a deal. In light of that, it may be time for a few of you to get a dose of reality so here are a few things to consider:

The Stock Market Is Not A Measurement!

The stock market is NOT the economy. It is, in my opinion, legalized gambling. It is understandable to be concerned about the constant volatility, but if you become consumed with the daily activity you will drive yourself nuts. If the swings cause too much heartburn for you then take out your money and put it in the bank or under your mattress and stop worrying.

Similarly, we have created a worldwide instantaneous news feed that has made addicts out of too many people. The constant barrage of great news followed by “doom and gloom” stories is enough to depress even the most optimistic person. Do yourself a favor and don’t read anything whatsoever related to news events for a few days. Avoid the online crack habit and read a book instead or do some other activity. I cannot tell how invigorating it is and how you will immediately get a sense of relief. Then extend the moratorium – the longer you avoid filling your head with all this conflicting information, much of which is terribly negative, the better you are going to feel – guaranteed!

Measure Recent Results

The most recent past is a glimpse into the near future. Adopt a “what have you done for me lately” attitude regarding any business for sale. Forget about what it did in the glory years or the delusion opportunities the selling side may present. What you have now is what you will get, and will likely stay that way for a while so weigh your valuation and decision on the reality of today and not hallucinations of tomorrow.

There Is A Ton Of Available Capital – But Not For You

Third party lenders (a fancy term for banks), have never been a factor in funding small business purchases. Since the beginning of time of buying and selling businesses, seller financing was, and still is, the major vehicle to get businesses sold. Anyone who tells you otherwise is either lying or misinformed. Besides, it is the ONLY way to get deals done today, have gotten done in the past, and will get done in the future.

Be Patient

I can find a reason to not buy every single business listed for sale, but that is simply not how to achieve success. Every business has warts and problems. The only “perfect” business is the one you cannot find so here too; forget about that strategy. However, this does not mean that you should rush into a deal. Be patient. Stay focused. Look at as many opportunities as possible BUT understand that you have to pull the trigger at some point. You need to realize that “looking for a business” is entirely different from “buying a business”. As such, the credo here is to take your time, but don’t waste your time.

Make Offers

This is undoubtedly the single most important strategy you need to adopt. It is the only way to elicit a meaningful response from a seller. If you do not like the counter-offer, or there is none at all, or a deal becomes unworkable, then move on. There is nothing lost and the opportunity to structure the right deal can only materialize by tabling an offer. There are mechanisms you can include in any offer to protect yourself so that cannot be a concern. If you find a business that interests you and the fundamentals prove to be intact, then get an offer in writing and in front of the seller. You may be very surprised what evolves from it, and it is certainly the most effective way to generate a qualified dialogue between the parties.


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