Saturday, October 5, 2024

How to Buy a Business in a Potential Recession

 Today, I’m addressing a great question from Jesse, who’s concerned about buying a business right before a possible recession. Here’s how you can approach this situation with caution: 


1. Assess Industry Impact

  • Recession Sensitivity: Different industries react differently to economic downturns. For example, luxury goods and travel-related businesses often suffer more during recessions than essential services like healthcare or basic consumer goods. Evaluate the industry of the business you're considering. Are its customers likely to cut back on spending during a recession?

  • Local Economy: Consider the economic health of the area where the business operates. If major employers in the area are vulnerable to a recession, the local economy might decline, affecting local businesses.

2. Evaluate Expense Structure

  • Variable vs. Fixed Costs: Businesses with high fixed costs (e.g., rent, salaries) are more vulnerable to revenue declines. Look for businesses with more variable expenses that can scale down with reduced revenues. This flexibility can help the business weather economic downturns better.

  • Cost Management: Review how the business manages its costs. Can it adjust its expense structure if revenues drop?

3. Review Reporting Systems

  • Financial Monitoring: Ensure the business has strong reporting systems to track financial performance in real time. Good reporting helps identify problems early, so you can act before issues become severe.

  • Data Accuracy: Verify that the financial data you’re reviewing is accurate and up-to-date. Strong reporting systems should reflect real-time performance and trends.

4. Negotiate Terms of Sale

  • Financing Structure: If possible, negotiate favorable terms with the seller, especially regarding financing. Seller financing can be flexible and might include terms that help you manage downturns, such as interest-only payments during slower periods.

  • Flexibility in Terms: Discuss terms that allow for adjustments based on business performance. For instance, you might negotiate terms that adjust based on future sales or performance metrics.

5. Understand the Seller’s Motivation

  • Motivation Check: Find out why the seller is selling. If they’re motivated by personal issues rather than economic conditions, they might be more open to negotiation and seller financing.

  • Seller Insight: A seller who’s transparent about their reasons for selling and willing to assist with the transition can be a good sign. Conversely, if they’re insistent on a high price with no flexibility, they might be trying to offload a problematic business.

6. Build a Relationship with the Seller

  • Trust and Communication: Developing a good rapport with the seller can provide valuable insights into the business’s true condition and the seller’s motivations. A cooperative seller can also offer support and advice post-sale.

  • Negotiation Stance: Approach negotiations with a mindset of collaboration rather than confrontation. This can lead to better terms and a smoother transition.

Final Thoughts

A potential recession doesn’t necessarily mean you should avoid buying a business, but it does require more careful consideration and due diligence. By evaluating the industry’s sensitivity to economic changes, understanding the business’s expense structure, and negotiating favorable terms, you can better position yourself to make a sound investment.

There is an entire module in Business Buyer Advantage: Online Training all about structuring purchase deals in a recessionary environment. Learn more at https://www.BusinessBuyerAdvantage.com

If you haven’t already, sign up for my email list at https://www.DavidCBarnettList.com 


Friday, October 4, 2024

Jerry buys a medical equipment biz in asia Video

 


This is a PAID consulting call for a real viewer who needs help on a deal. It's all incelebration of my new book 'Buying vs. Starting a Small Business: Search or Startup? A Guide to keep you from Going Broke' Find it now at Amazon.com here: https://a.co/d/bdsOvUe The Canadian Amazon store here: https://a.co/d/cEEPheJ The UK Amazon store here: https://amzn.eu/d/7GFGeUz The Australian Amazon store here: https://amzn.asia/d/g6ZbNa1 Or any other local Amazon store you frequent. You can even buy a pdf copy from Gumroad here: https://dbarnett.gumroad.com/l/BuyvsStartSMB

Wednesday, October 2, 2024

11 due diligence areas SMB owners miss

 


***New Video Alert!

What happens once you own a business.

Just clear sailing and profits, right?

NOPE- You’ve got to have a continuous attitude about due-diligence in these 11 areas to keep from having to deal with out of control situations growing without your notice.

I’ll walk you through it in this week’s video:  https://youtu.be/gKrf_lkY6NE 

Cheers


See you over on YouTube

David C Barnett


Saturday, September 28, 2024

Unlocking Opportunities in Underutilized Businesses

Today, I want to share an intriguing scenario that highlights how underutilized businesses can present fantastic opportunities for savvy buyers. https://www.youtube.com/watch?v=ZJgNWU-sxeQ 



The Scenario

I was chatting with a friend who recently visited a small seaside tourist town and delivered a marketing course to local business owners. One of the participants owned a retail shop that operates only five months of the year, catering to the summer tourist crowd. Despite the seasonal nature of her business, she gets phone calls around Christmas from people wanting to order her products.

When asked what she does with her inventory at the end of the season, she mentioned that she discounts it to clear out as much as possible. My friend then suggested she consider taking her business online and collecting email addresses from her summer customers to build an online presence. To her surprise, she had never thought of this.

The Opportunity

This situation represents a classic example of an underutilized business with great potential:

  1. Established Base: The business already has a base of sales and some level of profitability. It’s not starting from scratch.

  2. Brand Recognition: The shop has brand recognition and customer interest, evidenced by people calling even after the season ends.

  3. Growth Potential: The business could benefit from modernizing its approach by moving online and leveraging digital marketing.

For someone who understands the internet and e-commerce, this represents a significant opportunity. Instead of starting a business from the ground up, you can buy an existing one and implement digital strategies to enhance its profitability and value.

Why This Matters

In my business buying courses, I often emphasize the principle of not paying for "blue sky"—that is, not overvaluing a business based on speculative future benefits. However, the real value in buying a business comes from what you can do with it. Here’s why this approach is advantageous:

  1. Pre-existing Assets: The business comes with established sales and some degree of brand awareness. You’re not starting from scratch; you’re building on an existing foundation.

  2. Realizing Potential: You can acquire the business at a reasonable price and then apply your expertise to evolve it into something much more valuable.

  3. Strategic Improvement: By integrating online sales and digital marketing, you can significantly increase the business's revenue and market reach.

Looking for Opportunities

If you’re considering buying a business, look for these types of opportunities:

  • Underperforming Businesses: Businesses with potential but lacking modern strategies.

  • Seasonal Operations: Seasonal businesses that could benefit from year-round revenue through online channels.

  • Owner Fatigue: Businesses where the owner is ready to retire or lacks the interest to innovate.

These scenarios often provide a head start and allow you to leverage your skills to enhance the business’s value.

Final Thoughts

If you’re interested in exploring small business buying, selling, sign up to my email list https://www.DavidCBarnettList.com to keep you updated whenever we post new videos and content. 


Friday, September 27, 2024

Patrick small online ecommerce Video

 


This is a PAID consulting call for a real viewer who needs help on a deal. It's all incelebration of my new book 'Buying vs. Starting a Small Business: Search or Startup? A Guide to keep you from Going Broke' Find it now at Amazon.com here: https://a.co/d/bdsOvUe The Canadian Amazon store here: https://a.co/d/cEEPheJ The UK Amazon store here: https://amzn.eu/d/7GFGeUz The Australian Amazon store here: https://amzn.asia/d/g6ZbNa1 Or any other local Amazon store you frequent. You can even buy a pdf copy from Gumroad here: https://dbarnett.gumroad.com/l/BuyvsStartSMB

Wednesday, September 25, 2024

Non SBA Deal Financing

 


***New Video Alert!

This week- a question from a Canadian who wants to know how to do deals where he lives.

But- even Americans should learn how non-SBA deals are done because they can be cheaper!

I’ll walk you through it in this week’s video:  https://youtu.be/Pwa_EsrHl58 

Cheers


See you over on YouTube

David C Barnett


Monday, September 23, 2024

LIVE Fractional People in the C-Suite

 


Bits and Pieces of Leaders- The Fractional C-Suite Movement.

New Livestream guests-

Devoreaux Walton MBA, CMO
Jennifer Doherty MIRHR
Kevin Robinson, MBA, CPA F-CFO
Mathew Kerbis, Fractional GC  

I’m happy to have this great group of professionals join me on a live broadcast.

Tune in and as we’ll be discussing when and how growing small businesses can take advantage of fractional specialists and maybe when they need to get one full-time.

This is a ‘must see event’ for anyone with ambitions to grow beyond their own personal abilities as business owners.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/i-7HOd2qSyY 

We’ll be going live Monday September 23, 2024 at 12 Noon Eastern Time and 1PM Atlantic Time


See you there!

David C Barnett