If you are thinking of buying or selling your business, news of economic uncertainty can be reason for you to feel panicked about your options. Fear not, though, the human race is built on its ability to survive anything and life, and business will go on.
This time can, in fact, be the ideal time for buyers who are looking for an investment and, therefore, sellers will still have the opportunity to sell. In particular, there are sectors that tend to thrive in a recession. So, if you want to get ahead of this, read our advice and get ready to take the bull by the horns.
With coronavirus wreaking havoc in parts of the globe and oil price disruptions, on Monday 9 March we saw the worst performance on Wall Street in a decade. While the markets recovered slightly the next morning, there are still worries over the price of gold and bonds.
The coronavirus has caused millions of consumers all over the world to stay home and this has affected spending patterns. There are also fears that workers all over the world will not be able to leave homes. This could lead to a drop in productivity.
The outbreak of the virus in Italy has made the UK nervous as it is now right on our doorstep.
Coupled with this, Saudi Oil has cut its market shares leading to reduced investment and job losses. Demand for oil has also lowered due to the slowdown in trade and travel thanks to coronavirus. Living in a globalised world has meant that there is no escaping the trials and tribulations no matter how far away they seem.
The sudden drops that we are seeing in the global markets have led to many feeling a sense of panic as the effects of the 2008 crisis echo loudly in our ears. There is, however, some reassurance to be had. It’s not all bad and could, in fact, be a time of opportunity!
Some sectors have seen success
In amongst the downturn, there are some businesses that have seen a positive jump. Some of these are obvious. For example, any businesses that produce or stock hand sanitiser, soap, face masks and toilet paper. Other household goods are also being stockpiled by people around the country.
There is no doubt that because China is the manufacturing centre of the world, a shutdown will affect the supply chain in a lot of industries. However, there are several UK sectors that are not directly impacted by changes in China and, therefore, should be able to better weather the storm.
Utilities, engineering businesses and insurers are all shielded from the worst of the effects of the large-scale quarantines in China. If you are hoping to buy a business, you might consider these sectors as their operations will be relatively unaffected.
Of course, you could, as a buyer, be hoping to take advantage of the downturn in order to buy your dream business for a reduced price. This is a great opportunity as the virus is already decelerating down in China pointing to positive eventualities.
In previous times of recession, while restaurants have seen a slow down as people try not to splurge on eating out, supermarkets will increase sales since people are cooking those meals at home.
In 2018, reporter Kaitlyn Tiffany coined the term “homebody economy”. This was used to describe the increasing number of people who like to stay home over going out. This part of the economy is booming as people are encouraged to stay indoors to avoid spreading the coronavirus and so tend to order more online.
This sector of the economy includes streaming services and home use appliances. Consider what parts of your business can be moved online. This could be the ideal opportunity to finally get your ecommerce operations going. You may want to acquire an ecommerce business that you can merge with your brick and mortar in order to do this as smoothly as possible.
“For prospective business buyers buying a business during a crisis such as we have at the moment with the Coronavirus can be a smart move!
“Businesses that I believe will be in great demand over the next couple of month’s include local convenience stores, set to benefit from large supermarkets being avoided by very cautious customers and hot food takeaway businesses such as fish & chip shops as people may decide not to eat out so often but treat themselves to a carryout instead. Post offices are also well placed to weather any economic storm.
“I also believe that the problems with Coronavirus will pass in a few months, it is, therefore, a good idea to buy almost any business now as the sales process is likely to last up to 3 months and new owners will benefit from the resurgence of confidence from consumers,” says Derek Burgoyne of Cornerstone Business Agents.
However, no matter what industry you are in, there are reassurances from the Bank of England that the UK economy will be guarded against the effects of the virus and the shock to the market. Interest rates have been cut to an incredible 0.25% to encourage borrowing and support growth. This is the lowest in history.
Small business sellers
So, what does this mean for someone that is looking to sell their business? The advice that you should keep referring back to is to be patient. Knee jerk reactions are never advised. If you have a well-run business that is valued correctly, you are in a good position to be an attractive proposition to potential buyers.
“My advice to business owners,” says Derek Burgoyne, “thinking of selling is to proceed with caution! Speak to professional agents who can give realistic advice and importantly a considered opinion of value and asking price. Be wary of any agent who tells you there are no problems and as long as you pay them a hefty upfront fee they are sure they will have your business sold on no time.
“Business buyers are sophisticated these days, they will pay a fair price but not overpay for a business. To achieve a sale therefor trading figures must be available and the correct marketing strategy planned. Throughout all the challenging periods of the past, I have always found business will still sell if the sale is handled properly.”
If you have a local small business that has value in your community, you will always have value and, therefore, don’t be scared off of the idea of selling your business. Stay on course and be excited at the potential buyers looking to buy a good, solid business at times when the stock market is unreliable.
In 2019 alone, we had 164 742 new listings created on our site. This is proof that an online marketplace will give buyers and sellers everywhere the ability to connect. No matter what the economic climate, you can advertise your business and have 16 387 171 people visiting our site and potentially finding your listing.
Every small business owner should have an exit strategy plan from the early days of their business. Running your business so that you are always in the best possible position to sell makes business sense. The longer you have been preparing the greater value you will see in the sale.
So, consult our selling guides so that you can check that you are on the right track. Sticking to this tried and tested formula is important even when you feel the economy is insecure.
Of course, every business will be affected by the economy. Andrew Markou, CEO of Dynamis, says, “All businesses, no matter their size, have to react and respond to wider economic circumstances. This is most true when an economy is in recession. Becoming conscious of your costs so that you are able to re-evaluate every line will become absolutely necessary. BusinessesForSale.com was able to benefit in times of economic uncertainty because users were able to realise that we were a cost-effective and necessary supplier for their business.”
It’s important, therefore, to make sure that you are offering a valuable service for the right price. Then, if you are sceptical about selling, you can focus on keeping costs low and improving your offerings. This will keep your business prepared for an eventual sale.
Small business buyers
There are a lot of options for those looking to invest in a business that is able to withstand downturns and even recessions. If you are concerned about the future of your business and you want to ensure that you are in a good position no matter what happens to the markets, there are plenty of options.
Derek Burgoyne gives some advice to buyers, “As a veteran business sales agent who has been selling businesses for over 30 years I thought I had seen it all regarding market fluctuations, I clearly remember black Monday in 1987 when global stock markets collapsed like a set of dominoes, the economic crash of 2008, and many other challenging events. The Coronavirus is, however, a new one to me, and everyone else. What I can say from my long-time experience is that we will get through this and get back to a form of normality.
“For business owners thinking of placing their business on the market this, in fact, can be a good time to do so, the reasons for this include the fact that there are still a lot of buyers out there looking for suitable businesses and, as it’s likely some owners will be put off selling right now, there will be less competition. Another consideration is that when we do get over the problems caused by the Coronavirus there could be a backlog of businesses hitting the market creating a buyers’ market.’
Corporate cleaning services are usually the last thing that people can do without. A business cannot run if it isn’t clean and, in a downturn, businesses will be wanting to make customers feel more welcome, not less. You are, therefore, almost guaranteed continued business as long as you run your business well and can compete with others in the sector.
Any industry that helps people keep what they have for longer so that they don’t have to spend money buying something new is also a good bet. Building maintenance, repairs and handy-man services are all both good options.
Invest in a franchise
If you are still nervous about making the leap into the unknown as a buyer, why not consider buying a franchise? This will allow you to have a support system behind you that will be doing everything they can in order to make sure that you succeed.
“Franchising gives you the backing of experienced management teams and financial resources that are able to remain comparatively stable during times of economic uncertainty. You will, however, be wise to carefully vet the franchise that you invest in to make sure that they do have the experience and clout that will act in your favour. If you are overly worried about an unstable market, consider franchises that have stood the test of time or those that are in demand during recessions,” Richard Smith, Lift Brands.
Find a franchise that is tried and tested and, perhaps, one that has already withstood the recession back in 2008. This should give you confidence that you have a winning formula on your hands.
Affordable take away will always be in demand and, in times of financial uncertainty, they are particularly popular as people are hesitant to spend money at more expensive establishments. The corporate cleaning sector is also full of franchise opportunities that will be a wise investment.
Fear will make things worse
If anything, at this time, fear or panic will cause a self-fulfilling prophecy. The best way for things to remain on track is for our behaviour to remain on track. Don’t act for the short term. Keep your eyes on your end long term goal and, as long as you act in accordance with this, you will still be set to reach it.
Markets go up and down and the media will report on it, but you need to think about the fundamentals when it comes to buying or selling a small business. Make sure you are as prepared and attractive to buyers as is possible if you are looking to sell your business.
And, if you are a buyer, be aware of the alternative ways that you can secure funding if you are looking to buy a business and are nervous you won’t be able to get your capital in a more traditional way.
BusinessesForSale.com has seen the peaks and troughs and we have been amazed at the staying power of small businesses. There will always be buyers and sellers for the right businesses in the right sectors. So, don’t panic, stay on course and keep working towards success.
We have been in business for more than 20 years and have managed to weather the crashes of 2001 and 2008. We did this by being adaptable, being patient and tending towards calm over rash decision making.