Many may say that 2009 is a good time to sit on the sidelines and wait it out. They would argue that many businesses are not doing well right now, the banks aren’t lending, the economy is at its worst in decades, it is best to wait until things improve.
I take a contrarian view to this. I think now is a great time to buy a business. In 2007 business earnings were at their peak, most businesses had excellent growth, interest rates were low, and as a result business values were at their peak. Now that the economy has cooled off (OK, it’s more like an ice age in some markets) many businesses have seen their earnings decline. As a result the value of these businesses has gone down. So a business that would have been priced at a premium in 2007 may be a bargain today.
I’m not alone in this thinking. On a much larger scale guess who is investing in US stocks right now. You probably guessed it, Warren Buffet. He recently said that while he cannot predict how stocks will do in the short term, he is confident their value will increase from these values in the long term and he considers many of these to be a good value right now.
This rationale holds true for small businesses too. A quality small business for sale in 2009 is likely valued much lower than it would have been in 2006 or 2007. If the businesses fundamentals are solid and the basic business model is a good one, this could be a real bargain. When the economy recovers, small business will lead the economic growth again with increasing revenues and profits.
Unless you truly believe this is an economic ice age, then 2009 may be the best time to buy a business at a bargain price.