The U.S. has been experiencing one of the greatest inflations in its modern history – with incredibly high gas prices, rising food costs, and much more. However, every inflation is later met with an inevitable recession. The question is, is a recession a good time to buy a business? As an entrepreneur, knowing when to invest versus when to wait is key to making a profit. As a business owner, a recession is a good time to cut back on costs and lay low as consumers begin to shop less and save more. However, an investor may find that a recession is a great time to make an offer on an existing business listing.
The start of a new business during a recession may be unwise, but purchasing an existing one is the right move. Why? You’re buying an established business that comes with:
- a loyal clientele
- vendor and supplier list
- comparable profit margins
- an established position in the market
However, it does not stop there. The benefits of purchasing during a recession include:
- More opportunities because business owners might be unsure about the future, and are hoping to sell to exit beforehand.
- There is less competition because fewer investors will be on the market and searching for similar businesses.
- The purchase prices may be lower because demand is down.
- At this time, hiring staff is easier because a recession often causes high unemployment rates.
- Assets are often cheaper and more accessible because folding businesses are attempting to sell everything – including equipment.
Any investment comes with its risks, and that is no different during an economic recession. However, if you have a strong business plan and can keep the existing business afloat and make (even a small) profit, then you just might be able to resell once the economy strengthens again. In fact, historically, many of the world’s largest corporations gained much of their success during global and national economic hardship.
If you are interested in purchasing a business during the upcoming recession, do not hesitate to reach out to your local business advisors at Transworld Business Advisors San Diego North. Due diligence and market research will need to be thorough and transparent during this process to ensure nothing falls through the cracks – and we have the expertise to walk you through all of it.