The delirium of disaster headlines could lead you to believe 2009 is no time to be buying a business, but a stormy economic climate can generate great opportunities for business buyers.
When a downturn hits, deals can still be struck, credit can be raised and business opportunities are nonetheless there to be driven home and capitalised on. Do I sound completely insane? Well, I assure you I’m not.
Although erring on the side of caution is wise during an economic slump, it shouldn’t be a buyer, vendor or broker's sole mantra.
Volatility creates opportunities, don’t be blinkered by the overall surrounding bad news, focus on the opportunities
Marc Fecher, Kingston Smith
“Volatility creates opportunities, don’t be blinkered by the overall surrounding bad news, focus on the opportunities,” says Marc Fecher, partner and chartered accountant at Kingston Smith.
Volatility can be an entrepreneur’s saving grace during a recession. Without volatility Lloyds might never have sought the opportunity to acquire HBOS, and Sir Philip Green may have missed the chance to buy Moss Bros and then sell it at a £1m profit only two weeks later. Opportunities presented in a recession prove one man’s trash really can be another’s treasure.
Starting from scratch during a recession may still be challenging, but when was it easy? For those unprepared to start at ground level, it could be the most fruitful time in a decade to buy into an existing business. Cue Marc Fecher again: “In reality, it’s much more difficult to set a business up from scratch compared to actually acquiring a business. Hopefully, the business you’re chasing is profitable or near profitable.” Buying a business means you automatically leap the headache of start-up stage which can be long and costly.
As a first time business buyer, seeking the opportunities that are currently profitable to limit risk is preferable, but if you’re a previous business owner with a good track record of turning businesses around, you have greater scope to capitalise on a financial crisis. Seizing on an underpriced competitor could add value to your existing business, or their assets may help to increase market share. The potential to grow through acquisition increases greatly during recession.
Patterns
Shaun Sweeny, founder and managing director of UK based business broker Turner Butler, relishes the thrill of a recession. Says Sweeny: “Personally, I believe we are standing on the biggest exchange of business the UK has ever seen.”
Whether optimistic or opportunistic, Shaun’s positivity is grounded in 40 years experience of running a successful brokerage. Shaun adds: “The 80s recession saw fundamental change in Britain. Employees went from working for big companies and industries, which seemed to disappear overnight, to starting businesses of their own. Successful business owners who built in the last recession are now retiring, and they are meeting an influx of individuals, 10 years their junior, who’ve worked for large corporations all their lives but recently been laid off . Rather than go back into the market, these 40 and 50 somethings are looking to buy a secure future.” What Shaun is describing here is a cyclical pattern of economic, fiscal and vocational behaviour.
