• Australian Business Sellers and Buyers Register

Buying and Selling During a Recession

Buying and Selling During a Recession 940 627 Richard Willis

One of the biggest decisions a business owner or a prospective business owner might have is whether they should sell or buy a business during a recession. There is no direct answer to this, as the decision depends on the impact the recession has had on your company and your individual situation. So today, we’ll be discussing everything there is to know when it comes to buying and selling during a recession.

Selling During a Recession

The Company’s Financial Health

If you have gathered and set aside sufficient amounts of working capital, you’ll be able to not only survive a downturn but even thrive during the tricky time.

Business Valuation

One of the first questions you should ask yourself is what kind of impact the recession will have on your business value. If your business provides the type of service that is considered essential, the business valuation could rise. If that doesn’t apply to your business, the business value could be impacted negatively.

Buyer Financing

In order to make a successful sale, you will need a qualified buyer. One of the main requirements is for the buyer to have sufficient funds to buy the business. If the buyer doesn’t have enough personal funds, lenders may not be willing to fund certain businesses during a recession. In turn, this can lower the number of prospective buyers for your business.

Buying During a Recession

Buying a business that’s already up and running certainly has its benefits. And if you make the right moves, you can pay a low price for a business that can increase in value after the recession. However, there are some things to keep in mind.

The Industry

One of the first things to consider is the type of industry the business is in. Certain industries can suffer more than others. So you would need to carefully evaluate the current situation the business is in, and what its potential is to recover after the recession.

The Financial Health

The business’s cash flow is an important factor to think about, as it will reveal whether the business was making money in the past and how it’s doing now. In addition to that, if the business sells to other businesses, you would need to examine the financial health of those businesses as well. That’s because even a thriving business can be forced to close if half of its customers declare bankruptcy.

Funding Options

In order to be considered as a prospective buyer, you will need to have funding in place. If you don’t have enough personal finances to cover the costs yourself, you will need to consider getting a loan. That, however, can be tricky during a recession since many financial institutions are unwilling to lend money during an economic fallout.