86% Of Buyers Are Shopping The Same Shelf

What The Q2 Numbers Say About Buyers, Not Businesses

A total of 2,117 businesses changed hands in the second quarter, down 10% from the previous quarter and down 10% from the same quarter last year, according to BizBuySell's Insight Report. Total enterprise value was $1.8 billion.

Read the survey underneath the transaction count and the picture stops being about a slowdown.

86% of buyers said they were looking for recession-resistant businesses. 64% said they wanted a business that is already thriving. Nearly eight in ten expect to use SBA financing to get the deal done.

Nobody left the market. The pool narrowed its aim, all at once, at the same target.

Here is what most people do with a survey like that. They read it as information about businesses, as if 86% agreeing on a preference somehow makes the preference smarter. It is not information about businesses. It is information about your competition.

A survey of what buyers want tells you what you will be bidding against, not what is worth buying.

Already Thriving Means Somebody Already Got Paid For It

Take the 64% first, because it is the cleaner example.

A business that is already thriving got that way because somebody did the work. They fixed the pricing, or built the crew, or landed the accounts, or spent four years turning a mess into a machine. That work has value, and the seller is entitled to be paid for it. That is what a business sale is.

But understand what you are buying when you buy it. You are buying the outcome at retail, and you are bidding for it against roughly two thirds of every other buyer in the market.

The seller knows this. The broker definitely knows this. When two thirds of the buyer pool is chasing the same profile, the listing does not need to be priced attractively, because attractive pricing is for businesses that need help finding a buyer.

Now the 86%. Recession-resistant is a real property. I am not going to sit here and tell you it does not matter whether a business survives a downturn, because that is the single most important thing about a business you are financing with debt.

The problem is that recession-resistant, as most buyers use it, is a category rather than a measurement. Essential services. Repeat customers. Nondiscretionary spend. Those are stories about a business, and stories get priced into a listing the moment a broker can write them in the summary.

Two businesses can both sit under that label and only one of them survives a bad year on paper. The label does not tell you which.

The Version Of This That Is A Number

Watch what happens when you convert the story into arithmetic.

The Bulletproof stress test asks one question. If revenue drops 20% and the cost structure does not fully follow it down, does the business still cover its debt service at 2.0x or better?

That is the recession-resistance question with a number attached. It does not care whether the business sells essential services or luxury add-ons. It does not care what the broker wrote in the first paragraph. It asks what happens in the bad year and it gives you a figure you can compare across two listings in different industries.

Run it a few times and something useful happens. Businesses that carry the recession-resistant label and fail the test start showing up, and they show up priced as though they passed. Meanwhile businesses nobody would put that label on, because the industry is boring or unglamorous or hard to write a paragraph about, clear the bar and get priced like ordinary deals.

You can run any listing through the Bulletproof calculator at DealScore Pro and get the stressed coverage figure in about sixty seconds. The interesting part is not the deals it fails. It is the deals it passes that you would not have looked at twice.

I had a corporate executive tell me last year that he had ruled out an entire industry because he could not imagine it holding up in a downturn. He had never run the numbers on a single listing in it. He had run the vibe.

Where The Room Actually Is

I want to be careful here, because there is a bad version of this argument and I am not making it.

The bad version says go buy what nobody wants. That is not advice, that is contrarianism, and it puts people into broken businesses on the theory that the price makes up for it. The price never makes up for it.

The good version is narrower. Buy the business that passes the test, and stop paying extra for the business that also passes the story.

The transaction data supports this more than the survey does. Volume fell 10% while the businesses that did close held their quality. That is not a market with no deals in it. That is a market where a large, well-funded, well-informed pool is competing hard for a specific slice of it, which necessarily means the rest of the market is getting less attention than it did a year ago.

The other number worth sitting with is the 78% expecting SBA financing. Almost your entire competition is working inside the same lending rules, the same coverage math, and the same underwriting timeline you are. Appetite is not what separates buyers in a market like that. Preparation is.

After 35 years of looking at these, the buyers who do well in crowded markets are almost never the ones with the best instincts about which industries feel safe. They are the ones who converted feel into a number early and then stopped arguing with it.

Everybody in this market is using the same filter. That is the reason it costs money and the reason it is not an edge.

What This Means For You

Stop filtering by the story and start filtering by the stress test. Take the next five listings you like, run each one at a 20% revenue decline, and see how many of your recession-resistant picks actually survive it.

If you want to see what that looks like on a real listing rather than in the abstract, run your own numbers at DealScore Pro and start with the deal you are most confident about. That is usually the one worth testing.

Mike

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

Forward this email. Tell them to grab Mike's free book - Real Estate Is for Suckers: Buy a Business Instead. Same framework Mike uses to stress-test every deal.