Buying a Business in 2019
By Andy Kocemba
New year, new you! Many people have always dreamt of someday buying a business, and as you look ahead to 2019, maybe you’re thinking it could be the time. Whether you have been in the corporate world for many years, or have recent small business experience, there are certain market realities already taking shape that you should be aware of if you plan to buy in the new year. More importantly, there are steps you can take right now to make sure you are prepared to take the leap into business ownership in 2019 and ensure you are making the right move and fulfilling your dream.
- Know the Market: As a buyer, a perfect world would include many businesses for sale on the market, all competing for you as a buyer, enabling you to be very selective and negotiate an aggressive discount. However, the reality as we enter 2019 is that most Baby Boomers are not yet selling their businesses. Whether that’s because they are staying healthy, living longer, saving more money, enjoying the strong economy, or simply can’t turn of their entrepreneurial drive, boomers are hanging on to their businesses. This means we are in a seller’s market. Don’t get discouraged, you can still find the business of your dreams.
- Know your Numbers: Generally, in a seller’s market, it will be harder for you as a buyer to find a “deal.” Be prepared for the fact that if you find the right business for you, you will need to offer a fair price. Notice, I didn’t say “overpay.” You need to understand what you can afford, and what numbers will work for you, so that you don’t find yourself in a situation you can’t survive. As preparation, get a strong grasp on your personal budget – how much income you need to live on, how much cash you have available to make a business purchase, and within what price range can you comfortable make an offer. Knowing your numbers will protect you and keep you from overpaying should you find yourself in a bidding war. Remember, it’s OK to pay a fair or aggressive price for a good business if you can still pay your debts, pay yourself, and create a return on investment. It’s not OK to overpay for a business if the numbers don’t work and it puts you at risk.
- Be Ready to Act Quickly: Once you know your numbers and have an idea of your target price range, you should also have a clear idea of what cash you have available for your business purchase. Make sure this money is set aside and ready to use. The ability to move quickly can put you ahead of other buyers in the race to purchase a business. Sellers have even been known to take a slightly lower sale price from the buying party who can move quickly. In a seller’s market, it is imperative that you enter negotiations prepared and ready to make a deal.
- 2019 will likely be a seller's market, but if you are prepared, you can still find the business of your dreams.
- Preparation is key. Set aside money and know what you are looking for so you can act quickly.
- While it may be harder to find a "deal," there are plenty of quality businesses available at a fair price that will still allow you to pay yourself, pay your debts, and get a good return on investment.