Would You Buy a Business in a Recession?

In times of uncertainty, making a decision about buying a business becomes difficult. Some Potential buyers continue to screen businesses for sale to find the perfect match but at the time of making an offer on the elected business, indecision becomes overwhelming. These buyers experience an analysis paralysis period when they simply can’t make a decision.

There are obvious reasons to this indecision:

  • Some buyers might believe if there is a deep recession prices for businesses will go down. Waiting might be the best decision.
  • Some buyers might fear that the economy collapses completely and customers leave after the closing.
  • Other buyers might prefer to make safer investments such as bank saving accounts or GIC’s.
  • Some are simply paralyzed by the media hype about recession and can’t make any decision.

These reasons should not stop motivated buyers to acquire their dream businesses and change their lives:

First, in times of recession massive corporate layoffs put thousands of corporate executives in their mid forties and fifties out of the job market with a very small likelihood to find other suitable jobs. Buying a business becomes a very good alternative for these corporate victims. As a result there are more potential business buyers in a recession than in very good times. Therefore, prices for small and midsized businesses generally don’t decrease in a recession. Waiting for prices to decrease is obviously not a good idea.

Second, a recession is defined by two consecutive quarters with negative growth. In most recessions in the past, growth was slightly negative during a limited time period (generally 6 months) and then the economy starts growing again. In most cases economic growth slows by no more than 4% on average. This is not a huge number and on average will not dramatically change the prospects of the average business. Naturally, some businesses will continue to grow and be more profitable in times of recession and others will suffer dramatically (much more than average). This simply means that business buyers should look into businesses that will not be dramatically affected by the economic slowdown. Moreover, a good business is a good business irrespective of recession. Warren Buffet, the second richest man in the world, recently declared that his investment strategy will not change despite the recession in the US.

Third, investments perceived to be the safest are generally not so safe and are described frequently as the worse investment one can make over the long term. These investments generally produce very low returns, which after paying taxes end up below inflation rates. Investors are actually losing money when investing in these vehicles. Is losing money and knowing it in advance safe? Absolutely not. Moreover, investing your money doesn’t give you a job. If you are looking to be your own boss and doing something you enjoy doing, putting your money in a saving account will certainly not help you achieve your goals.

Finally, the media hype should not affect our determination to shape our own destiny. The media will continue to present events in a way that attracts people and humans are attracted by dramatic events. So the media has a tendency to dramatize events, especially those that affect our lives such as economic events.

People who are focused on success and have the character and personality to pursue their goals and make them happen will become successful irrespective of the economy.

If you are interested in buying a business in Toronto GTA and nearby areas in Ontario, Please visit our Business for Sale web page for a variety of businesses for sale or visit our business brokers website.

Published by

Omar Kettani

I am a business broker in Toronto. I am specialized in selling businesses with less than $10 million in value. I have a master of Engineering from a top-notch French Engineering school and an MBA from the prestigious Richard Ivey Business school in the University of Western Ontario where I specialized in entrepreneurial finance. I have a long experience in banking, business ownership, marketing and finance. I dedicate my career to helping small and middle size business owners sell their businesses to the right buyers.

4 thoughts on “Would You Buy a Business in a Recession?”

  1. Good sound advice on buying a business. There are a lot of excellent business opportunities available in any economy. People are selling because of many reasons – not out of fear of a downturn in the economy. Most rational buyers are looking at acquiring with a longer vision and exit strategy that goes beyond cyclical economics.
    david

  2. Hi Seema,

    Thanks for your comment. Unfortunately, there is no general answer you your question. In general terms, profitable businesses with a solid business model and a great reputation tend to continue to do well even in a recession. Of course, some industries such as health care and utilities etc.. are more resilient than others. However, the surest way to survive a recession is to buy a business that you enjoy. you will not count the number of hours spent on it and you will do what it takes to keep it successful despite the economic slow down.

    I wish you good luck in your business purchase efforts.

  3. Hello Omar,

    What a good point of view you got there about the idea of going into business in times of recession. The key, obviously, is to find your niche and find out what people need under the new economic conditions and what their new financial behavior is going to be.

    And for Seema, Omar is right, there is no general answer you your question. But you may want to try one of these top businesses to start in a recession; Accounting Services, Bulk Food Sales, Affordable Luxury Items, Debt Collection Agency, Resume-Writing Services, Auto Repair Services, Home Staging, Virtual Assistant, and Tutoring Services.

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