Saturday, June 9, 2012

Facing layoff? Maybe it's time to buy a business

If "owning 1 percent of something is worth more than managing 100 percent of anything," as businessman Harvey Mackay and many entrepreneurs believe, a struggling economy offers an opportunity to buy your own business.

Prices for all small businesses — notably media companies such as weekly newspapers and smaller magazines, radio stations, and PR and advertising firms — have been declining since the recession started in 2008.

The median selling price for a small business in the second quarter of 2011 was $150,000, down from $155,000 a year ago. <link> Because most small businesses are sold through seller financing of 70 to 80 percent of the price, a buyer would need to put down about $30,000 to $45,000 for that median business. That’s a lot of money, but it’s not $150,000.

Sure, a lot of businesses are on the market because they’re failing. Make sure you know the reason the business is for sale because, as business broker Robert F. Klueger has said, if you don’t know that, then you don’t know anything.

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