Today's question:
"What are some of the better businesses to buy in this "down" economy? What types of businesses tend to do better when the economy is down or retracting like the one we are in?"
Below are answers from our panel of professionals:
"Repossession companies (“repo men”) and locksmiths are doing well in this troubled economy because consumers are defaulting on auto loans and home mortgages at any extremely high rate. Because an auto loan is secured by a lien on the vehicle, a lender may repossess the vehicle when the borrower defaults on loan payments. The lender utilizes the services of repossession business to obtain possession of the vehicle, so that the lender can sell the vehicle in an attempt to cover its losses on the loan. Similarly, the high rate of home foreclosures and the resulting change in occupancy of the home is also driving business for locksmiths, who are hired to change the locks after the prior owner has surrendered the property or been evicted by the new owner."
From: Joe Sandbank, Attorney For Business Buyers, Owners, Brokers
. . . . . .
"Almost every industry is affected but some much worse then others, The ones with the least impact that I have run into are : coin laundry, scrap metal/recycling centers, defense industry, and. gas stations, They are down in volume but it is unlikely they will go lower then the current level even if the economy goes lower."
From: Willard Michlin, Due Diligence Consultant
. . . . . .
"It seems that anything that involves repair business is holding its' own-examples are shoe repair, auto repair, etc. Property management has been good for me since many people are looking to rent rather than buy. Restaurants that have medium to low cost food as well as markets that are known for lower cost food costs. Liquor license are selling at the lowest costs I have ever seen, because many high end restaurants are walking away and selling their one asset, their liquor license."
From: Bob Hughes, Business Broker, Coachella Valley Area
. . . . . .
"What kind of businesses do well during recessionary times? Obviously health care industries would be everyone thinks of as recession proof, but others are businesses that reflect consumers cutting their costs of living. They don’t go out to expensive restaurants or ice cream shops but they are still buying from the low cost restaurants. Even though they are cutting costs they are still spending on keeping existing autos going and personal hobbies (they have more free time) - Auto parts and accessories, motorcycle parts and accessories, boating parts and accessories, computer games, sport equipment, etc. People still need insurance on their autos and homes. They are not buying luxury goods and services, but they are spending on improving their education – private schools, educational books, home study courses, etc.
My advice is to study yourself and your friends. Understand what you and they are still spending money on. Those are the businesses that do well during a recession. You’ll be surprised at how many businesses are still doing well.
Last don’t overlook businesses that are just breaking even but will flourish when the economy turns. Now is a good time to buy one of those businesses. Interest rates are low and owners are selling at reduced prices."
From: Ron Hottes, Business Broker, Business Team in Southern California
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This question above was asked by a BizBen Blog reader. A panel of professionals who participate in the BizBen Blog have given their feedback to this question above. If you have a question you would like answers to - please phone me at 866-270-6278 and look for answers in our upcoming "Answers To Viewers Questions" section!
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See all contributions from Peter Siegel
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