Does Buying a Business Make Sense During the Pandemic?
Nowadays during the Covid pandemic, business valuations and commercial real estate prices are down. At the same time, interest rates on borrowed funds are at their lowest point in the last 5 years. It is anticipated that these valuations will begin to recover by the summer of 2021 when half the Canadian population will have been vaccinated.
As the purchase price of small companies is significantly lower than what it was before the pandemic, this time is quite an opportune time for savvy entrepreneurs and business builders to take some risk and acquire businesses with a goal to double or triple their investment as things recover. So, it can be a great time if you take the risk and make an intelligent business decision.
The decision on what business to buy during the pandemic should be based on market research and due diligence. It is key that you seek out expert advice and help prior to making a decision on how to proceed.
For anyone looking to buy a business, it is important to consider three 3 Key factors to make a decision on the business acquisition:
Choose the right business
Buy at the right time
Ensure you have the right location
In terms of these factors many industries are affected by the pandemic and will take longer to recover, while others will recover faster. Analyzing a business would be based on evaluating several factors:
How long will the pandemic impact the business and their recovery?
How far has this business declined and what is the expected performance for 2021?
Based on the recovery what is the funding potential?
Would a bank fund the purchase?
Buyers' patience and cash reserve determine the higher risk and higher profit potential.
This analysis is a good starting point to ensure that you are making the best decision on which businesses to look into purchasing.
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