Small business valuations relative to economic cycle

by a searcher from Harvard University - Harvard Business School

4 years ago

Hi all, if the goal of a search is to buy and run a small business for an extended period, e.g. 10+ years, it seems like it would be better to search in a downturn/recession vs. when valuations are generally high. Given the general consensus that the US is late in its current cycle, it could mean more opportunities will arise once the next recession/downturn begins. Curious if others agree as well as any research/analysis on the relative exposure of small business valuations to economic cycle and broader stock market valuations (vs. how uncorrelated or insulated they might be). Thanks in advance for any related thoughts, alternative viewpoints, or other considerations.

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10 comments

searcher from Harvard University - Harvard Business School

Thanks all for the thoughts

4 years ago | like reply | 0 likes

investor from University of San Francisco

I bought my firm right before the 2008 crisis, and in retrospect paid top dollar. (Side note: don't be afraid to pay for excellent buying advice.) But through the crisis I cut dead wood at the firm, aggressively cut variable costs and negotiated with lenders to stay afloat. We came out the other side lean and much more efficient. I grew, and continue to grow, the company. My view - act now.

4 years ago | like reply | 5 likes

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