Just in case you have been hiding under a rock or have stayed away from any of the business media, the world is in recession. This means very interesting times for the business broker community as previously mentioned in my earlier posts. One very interesting happening in time of recession are the bargain hunters. I suppose that one person’s pain is always opportunity for another.

Often the businesses that are on the market during a recession are those that are struggling, and in a lot of cases the recession just speeds up the process of that business' demise. These businesses are often untidy, don’t have great systems, the owners might have bad habits and in general everything is a little tired. The business can still make good money, but the pressure of a recession often means the tardier businesses have to hit the market.

Now getting back to our bargain hunters, these are often people that come and see us and say they want to grab a ‘do-up’ or a series of ‘do-ups’ for a roll-up situation. They can add their financial clout and previous experiences to right the ship, so these businesses can reach their true potential under their stewardship.

This all sounds fine and dandy while they are sitting in our office explaining their strategy to us. These are businesses that have to be sold and as such prices are significantly lower than they would have been when times were more buoyant. You can understand the idea to buy, dress it up, ride out the tough times and sell when things are looking a little rosier. Paul and I will often counsel them on what they might see and the response we always get is “We don’t mind a bit of dirt, a quick clean and a splash of paint will put that right”. But when it comes down to it, it never happens.

We recently worked with an advisor looking on behalf of his clients on a small untidy company that was once a very significant company. It still had an excellent name in the market place and Paul and I could still remember their advertising campaigns from the 80’s. The buyers were keen to re-enter this category, the business was tired and scruffy but it’s clients perception of the service was still at a higher level than the competition and the plant and equipment while not perfect was again better than their competition.

So the husband and wife turn up and her first comment was “I can’t work here the toilets are disgusting.” And while we mucked around making and accepting offers over a two week process, the deal 'came a cropper' because she thought the state of the toilets was a direct reflection of the quality of the business and its services. Now I can understand concerns about being neat and tidy, I am a Virgo and am told we are tidy freaks, but they knew the business was tired and the premises were bad and most importantly their offer was 30% less than the asking price and probably 60% under what somebody would have paid 2 years ago. So what difference does a scruffy office with dirty toilets make to the offering? As quoted “nothing a cleaner and a splash of paint wouldn’t fix”

The funniest part of the story is the wife was never going to work in the business anyway, she had a corporate position elsewhere and hubby is still looking.

So the moral of the story is to me you get what you pay for. If you want a do up then you have to expect to get your hands dirty and put some work into putting things right. If that is not what you want then that is fine as well, but expect to pay the current owner of that business goodwill for having done the work you weren’t willing to do. A business that is doing well in a recession will not be a bargain, if you want a bargain then expect to get your hands dirty.