This article are provided for information purposes only, and are not intended as legal advice.


Did you know that it is a good time to buy a business?

March 5th, 2010

You have been looking for a business for a long time but have not been in a hurry to buy a business.  Is procrastination to buy a business a good strategy?  When the economy was not doing well, waiting until price of a business to drop may have worked.   In most countries in the world, the economy is improving which should mean that businesses are doing better.  That will lead to more profits.   The deterioration of the economy led many companies to review their internal operations.  many realized that they were run inefficiently and it was possible to improve efficiencies with less staff.

 

As the economy grows, the businesses are able to grow without having to add as much overhead in prior years.  Many businesses are run much more lean than in prior years.  How does this impact your decision to buy a business?  It means that the timing to buy a business is better now than it has been for years.  Businesses have reduced staff and incurred the cost of restructuring.  Profits are improving as sales are improving. 

 

When you buy a business, the price is typically based on historic financial information and not on projections.  If you know that companies restructured, that reduced prior years profits.  If profits were reduced, the price associated with that business is lower.  As profits increase, the benefits are in the future being this year forward.  You may now be able to buy a business cheaper now than the identical business in three years time.  If properly run, the business should have much higher profits in the next few years than in the past.  As a result, the timing to buy is now, not in a year or two.  That same company will be more costly to buy when it gets another years of profits under its belt than now.

 

In summary, if you are looking to buy a business, look quickly because your opportunity to buy a business whose earnings are continually increasing is much greater now than compared to last year when earnings were dropping.


Filed under: Buying a business — Gary Landa @ 10:34 am


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