Written by CMG News Contributor, Doug Carleton
Now??!!!!? With nothing but terrible news about the economy, unemployment, failing businesses, and a worrisome future, why in the world would someone even consider buying a business? Well, stop and think for a minute; there are businesses that aren’t in dire straits. Approximately 70% of the working population still has jobs. Some businesses are hiring. As the economy starts to open back up slowly – very slowly – hiring will begin to pick up and more people will be going back to work.
Why might someone consider it?
Suppose you had been thinking about expanding? And suppose a company in a complementary business was having problems or had already closed? There could be an opportunity to acquire the business at a price that would have never been possible before COVID-19. The business could possibly even be acquired by assuming the owner’s debts which they might be thankful to be rid of. The same goes with a competitor. Maybe a competitor has left the field. Acquiring the business if possible and its customers could be very advantageous. Another possible benefit could be the acquisition of a better location.
Benefits of acquiring an existing business
One of the best reasons – to start off with – is that the business has obviously survived the startup phase which is where so many businesses fail. The business already has customers producing a revenue stream and financing is much more available for existing businesses with a proven track record, particularly SBA financing. Finally, also most importantly, the business already has a salary in place for the owner; otherwise, why would you want to buy it?
Approximately 10,000 boomers are turning 65 every day. Some of those boomers have started and built businesses and have reached the point where they want to retire and cash out for their retirement. COVID-19 has thrown a monkey wrench into many of these plans. They still want to get out, but it may be that to get anything like the price they might have wanted, they have to hold more financing now.
So even though buying a business might be the farthest thing from your mind, if you are in a position to consider it, it may be worth keeping an eye out.
This blog entry is an excerpt from Doug Carleton's 'The Daily Life Of A Small Business Owner' series. Doug is a mentor with SCORE, Startup Virginia, and Lighthouse Labs, and has 25+ years of experience in small business finance including 12 years in SBA lending. To contact Doug directly, please email him at firstname.lastname@example.org.