Like the majority of businesses, the recession has negatively impacted the business sales.  As the recession took hold on the economy and business revenues began to recede, so did business profits.  Most sellers found themselves selling at less than one third its original business value—just like in Real Estate, it became a “Buyer’s Market.”

Although one would think that buyers would greatly benefit from this recession, the recession had an impact on their ability to buy a business.  With the failure of the financial markets and major banks, leveraging a business purchase became very difficult, indeed, due to the lack of financing availability.  In normal economic times, one could purchase a business with 20% Equity and 80% Debt, normally based on a ten (10) year term.  Although it is still possible to get this level of financing, the requirements have become a lot more stringent.  The Small Business Administration (SBA), the financing program of most small business purchases, became a lot more stringent in providing loans.  As a result, sellers have taken on the financing burden.  Today, sellers that want to sell their businesses quickly normally are required to finance up to 50% or more of the transaction.

Although the world markets have suffered through this recession, the shrink in the dollar value has created opportunity for many foreigners to purchase business properties in the United States, while taking advantage of Visa permits.  Note:  Foreign investors who invest a substantial amount of capital in a US enterprise and who will develop and direct the enterprise, may apply for an E-2 Visa if their country of citizenship has the required treaty with the U.S.  The holders of the E-2 Visa may reside in the United States as long as they continue to maintain their status with the enterprise.  With the sterling latest surge over the dollar, many from the U.K bought (and continue to buy) businesses in the U.S., primarily looking for the E-2.  Normally, these buyers go after “cash cow” businesses such as low overhead Service Businesses which required minimal capital investment in fixed assets—such as Property Management, Lawn and Pool Services, and Painting services.

All in all, yes, the recession has slowed the business sales market.  But savvy buyers can take advantage of the situation.  And with all indicators showing the tide is turning, buyers should take note and perhaps jump in while the market conditions favor them.

Fernando Simo is an agent for Transworld.

Every year, thousands of people consider entrepreneurship.  The two routes are either to buy an existing business or start one from scratch.  Each course has advantages and disadvantages that one should consider.

Starting your own business can be very rewarding but needs to have a unique product, technology, or service.  Let’s face it, there are very few “new ideas” out there that have not already been tried.  One would need to complete a thorough evaluation of the marketplace, competition, need – in other words a Business Plan.  If you start your own business, you will not be paying for Goodwill or Bluesky.  Perhaps you can start from your home with no employees and greatly reduce the initial capital requirement.

However, you will need to support yourself (and family) from personal savings.  There may be months or years before profits are sufficient to provide the level of income needed.  Obtaining financing may be very difficult as there is no track record and no customers.  The chances of survival of a start-up business is low – a 75% failure rate according to the Bureau of Labor Statistics.

Buying an existing business may be a more efficient way to business ownership, but it is frequently more costly.  Existing business owners will expect a premium for providing you with an existing customer base and location.  The advantages of buying an existing business generally outweigh the disadvantages.  Existing businesses can normally obtain financing from financial institutions because they have established history, assets, and a proven idea.  The seller will quite often provide a portion of the financing in the form of a loan.

Established businesses are less risky because they have an existing customer base, relationships with suppliers, an operating process, a known location, and employees that are hired and trained.  In addition, there is an existing cash flow which can provide immediate income to the buyer.  Experts generally agree, in most cases, that paying the extra cost for an existing business will outweigh the risks of starting one from scratch.

Dan Younkins is an agent at Transworld and a CBI.