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Why Buying a Small Business Now is a Bad Idea


Why Buying a Small Business Now is a Bad Idea

Normally, I am a proponent of buying small businesses.

The data shows they make the world go round. The U.S. Small Business Administration Office of Advocacy, which defines a small business as a firm with fewer than 500 employees, states there are over 30 million such enterprises in the U.S.

But a convergence of factors has made the economic environment less favorable to small businesses, and I would hold off on buying one at the present time. Here are a few reasons why:

Volatility. Change is everywhere. Along with the disruption caused by the COVID-19 pandemic, a change in the nation’s political leadership means there could be more regulation. The possibility of more business interruption exists. Unless you own a strong, established business in an area that has survived the first shutdown and your business is considered somewhat essential, the volatility of operating a company with an interruption in cash flow means the business may not make it.

Continuing supply-chain issues. This remains an issue nine months into the pandemic. Shelves in stores are still not fully stocked. Furniture stores and other types of businesses are waiting months to get the necessary components to build inventory. Supply-chain disruptions can affect small businesses in numerous ways: reduce revenue, cause issues with production, and inflate costs.

Changing buying habits. Some buying habits have been permanently altered, and a vaccine for COVID-19 won’t substantially change those habits. There will be more online shopping and more “contactless” shopping. Anything that involves interacting with people will be affected, especially retail.

Changing business strategies. Buying a business is about buying a cash-flow stream, but what businesses are going to be around in the next five years? Disruption in how a business operates can change its core strategy and render the business no longer viable. Think of Blockbuster Video and Netflix, or your local enclosed mall shops and no-contact shopping with Amazon.

Tightening loans. Money is probably never going to get much cheaper to borrow than what it is now, but lenders are more cautious, too. It may be easier to get a home loan for your personal residence, but getting a commercial loan to buy a business is a different ballgame, and lenders are concerned about the unknown in small businesses going forward.

The solution is to slow down and really do your homework. Research and study the marketplace. What kinds of businesses have not been affected dramatically by the pandemic? Which ones won’t have additional regulation imposed on them in the future?

There are lots of businesses to choose from, but be selective. If you find a business that meets your criteria with good cash flow and a promising future, there is a good chance you may get a discount due to the unknowns of regulation and another pandemic. Not all business owners have the luxury of taking their time to sell; some have an urgency to sell. So in that scenario, there is a good chance you could leverage the reasons I mentioned to not buy a small business. Those same reasons could get you a discount on the purchase of the business.

Timing is everything in life, and with proper due diligence and good timing, you may get yourself a good business at a good price.


Terry Monroe (, is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business with ForbesBooks.  Monroe has been in the business of establishing, operating, and selling businesses for more than 35 years. As president of ABBA, which he founded in 1999, he serves as an advisor to business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.



The Locavore’s Dilemma

I live in Madison, Wisconsin, home of the exceedingly vibrant and sort-of-famous Dane County Farmers’ Market. Every Wednesday and Saturday, thousands of people—myself included—descend on downtown Madison to peruse and purchase fresh fruits and vegetables, baked goods, meats, cheeses, canned jams and pickles, arts and crafts, and even artisanal soaps. The city prides itself on its loyalty to local farmers and merchants.

Yet what at first blush seems a quintessential expedition of “buy local” greatness isn’t actually local at all. The Dane County Farmers’ Market belies its titular jurisdictional limits. Purveyors arrive in the wee hours of the morning from all corners of the state. Take, for instance, the Door County Fruit Markets company, which sells apricots, raspberries, strawberries, and blackberries. They hail from Door County, a three-hour drive across the state from Dane County. There’s also Canopy Gardens, producers of four varieties of salsa, whose home base is in the north central part of the state, separated from Madison by no fewer than six county lines. These are but two of many examples. Indeed, only a modest percentage of the venders come from within Dane County.

And then there are the buyers. Young people, old people, families, and businesses drive from all over Wisconsin to pick out the perfect tomato or to sample some of Stella’s famous cheese bread. Neighbors from Minnesota, Iowa, and Illinois likewise frequent the market. (Don’t forget, either, about the innumerable inputs that go into the farming process — tractors, irrigation systems, gasoline, the farmer’s morning coffee, and so on — that originate beyond the county boundary.)


The market’s popularity, variety, energy owe themselves to trade and to quality—not to locality.


If the Dane County Farmers’ Market were truly limited to local, its vivacity would be severely diminished. Plump, juicy cherries from three-hour-away Door County? Forget it. Salsa from Canopy Gardens? Sorry, they’re not “local.” Thankfully, we all recognize this as absurd. And we all recognize that drawing the line at the county is arbitrary. The market’s popularity, variety, energy owe themselves to trade and to quality—not to locality.

Foodstuffs—and in particular, produce—present fertile ground for undue emphasis on “buy local.” Often, the farmers relatively close to us will be able to provide higher quality produce, simply because of the short transportation time between harvest and market. Of course, soil and climate also influence quality, and nearby corn might be better than corn from a half a world away. Then again, though, you don’t hear anyone in Wisconsin championing local bananas.

Buy Best

The farmers’ market anecdote illustrates the crucial distinction between “buy local” and “buy best.” At first glance, the distinction appears merely semantic. Buying local because local is the best makes complete sense economically and socially. But buying local for the sake of buying local presents a philosophy steeped in isolation that falls dangerously close to tribalism. It advocates the contraction of trade and flies in the face of two centuries of liberalization and globalization of the economy.


Like the county line, the national boundary is completely arbitrary from an economic perspective.


Liberal, global trade has led to the vastest prosperity the world has ever seen. Adam Smith once wrote, “In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.” The less trade is restricted between individuals and across borders, the more “the body of people” can “buy whatever they want” the “cheapest.” In the 240 years since, increased trade and globalization has corresponded with a never-before-seen rise in prosperity. As society becomes more integrated, its members can leverage the division of labor, leading to lower prices, better goods and services, and a higher standard of living for everyone. It’s true that free trade and globalization make the rich richer. But they also make the poor richer. Trade provides cell phones to people in developing countries. It increases wages. It fosters international peace. As I have written before here and here, trade has made our modern lives what they are.

So it is one thing to personally live according the “buy local” rhetoric, boxing yourself in with higher prices and lower quality. But is quite another thing when the “buy local” rhetoric becomes enacted in law. The obvious harms that would befall a county-only farmers’ market are the same exact harms that policies of protectionism inflict upon nations and their residents. Like the county line, the national boundary is completely arbitrary from an economic perspective. National protectionism is simply “buy local” on a larger scale.

The original article can be accessed at


Joseph S. Diedrich is a student at the University of Wisconsin.

This article originally appeared on Republished with permission.