Nearly everyone takes a hit during the recession.
It might be corporate downsizing or it might just be finding ways to pay for ever-expensive gasoline to get you to and from your office, but everyone is affected. It's unfortunate, but you are also likely to see a number of businesses fail in a recession.
While this might be from poor planning or from motivational issues, it could also be a result of a lack of cash flow due to the poor economy. In any case, you're likely to see a significant increase in the numbers of small businesses that come up for sale when the economy dips.
It's a sad situation for the entrepreneur who started the business, but it has potential to be an exciting opportunity for an entrepreneur or well-seasoned veteran to small business affairs.
Of course, buying something as significant as a small business in a down economy requires research. There are many pros and cons to consider.
You may be faced with a significant investment upfront, but keep in mind your costs are still less expensive than they might be in a better economy
- Everything is on sale. One sign of a down economy is prices being slashed so that everyone can afford items. This could mean anything from office supplies to furniture for outfitting your new office or heavy construction equipment to tear the building down and rebuild it the way you want. You may be faced with a significant investment upfront, but keep in mind your costs are still less expensive than they might be in a better economy.
- With a number of businesses failing in a community, a well-organized business with a strong business plan has the perfect opportunity to thrive. While competition is certainly healthy in the business world, removing some of the weaker players in the field gives a well-designed business an opportunity to really shine. If you need to hire people to help you, now is the time. There will be some extremely talented individuals who will be without work due to aforementioned corporate downsizing or perhaps due to a failing business they have to sell. Pick up this talent and put them to good use in your business for a bit cheaper than you could in a better economy.
- There are often more tax incentives available during a recession as the government does everything it can to create jobs and right the wayward economy. Entrepreneurs who are willing to go out on a limb to create jobs can enjoy significant tax breaks.
- It's still a recession. Sure, there are plenty of businesses failing because of poor business plans, but some have perfectly good plans and are also going down the drain. Unless your business serves a specific need that people will purchase regardless of the state of the economy, it's still a risky endeavor.
- If you already have a job, buying and starting a small business will mean a significant portion of your time will be dedicated to your new venture. For your business to succeed, especially in a weak economy, you may need to quit your job to follow your passion. Making that move can be a tough decision, especially when you figure in benefits. Think hard about it before you make the jump.
- Unless you have the money lying around, gathering funding can be difficult. In a recession, banks are hesitant to give loans because they are less likely to receive the loan back in full. Sanctioning a loan to a new business is a risk many lending institutions aren't willing to take.
Clearly, there are numerous factors to consider when buying a business during a recession. Consider the pros and cons, making sure the positives outweigh the negatives before you make any final decisions.
The last thing you want to do is be saddled with a business you need to unload when few are interested in what you're selling.