My Blog

How to Take Advantage of a Bear Market

We are in a bear market.

Is it time to freak out and be fearful or is it the greatest opportunity you will have in business in a decade?

According to a recent CNBC article, this is what you need to know about a bear market:

  • A “bear market” is when stocks see a 20 percent decline or more from a recent high — but they’re also marked by overall pessimism on Wall Street.
  • Since World War II, bear markets have lasted 13 months on average, and stock markets tend to lose 30.4 percent of their value.
  • During those conditions, it usually takes stocks an average 22 months to recover, according to analysis from Goldman Sachs and CNBC.

What does that mean for you as a small business owner or executive?

Well, think back to the 2008 financial crisis or the 2015 stock market sell-off. It means that we will see financial difficulty take its toll on businesses and the people those businesses employ.  This is scary for most people and that fear actually makes things worse than they need to be.

But, it also means that a wonderful opportunity will present itself and soon!

Tony Robbins, in his best selling book Unshakeable (written specifically to help people who were hurt by the 2008 financial crisis and beyond) talks specifically about how bear markets creates the opportunity for geometric growth!

Geometric growth is where you grow your business 3, 4, 5 times or more in one year. The time to do this is during a bear market and there are specific strategies that you can use that I want to tell you about in this article and in an upcoming podcast episode on the Build a Better Business Podcast.

The Strategy for Geometric Growth **

** Please note that the below strategies are based on my opinion, ALWAYS consult professional accountants, lawyers, and any other professionals or government officials that can provide you with accurate information that is tailored for your individual needs. Never make business decisions solely on the opinions published on the internet or social media websites. 

Now that we have that established I want to share with you the relatively simple strategies that can lead to geometric growth in a bear market.

What you need is the correct mindset, accurate information (see above disclaimer) and the courage to execute when the time is right. Typically the opportunity presents itself in three scenarios and I have a strategy for each scenario.

Scenario 1 – A Competitor Wants to Sell

Some of your competitors are going to be in financial trouble and will be looking to sell their business and get out. You can capitalize on their financial needs and acquire an entire company for a drastically reduced amount. Done right and the seller will see you as a rescuer or hero even.

This can be an amazing opportunity to acquire assets in the form of buildings, vehicles, tools, and other items related to your business as well as the opportunity to acquire qualified people who will add unique skill sets and abilities to your team.

Of course, you will also acquire their customer list, social media sites, websites, phone numbers and business listings on search engines like Google but you can also acquire new product lines, new services to offer, and new suppliers that you previously were unable to acquire on your own.

Overnight you can double in size and one-year from now you can see returns of triple or more by removing inefficiencies, streamlining and systemizing operations, and providing your newly acquired customers with a differentiated buying experience.

It is extremely important that you do not overpay in this situation so you will have to do your homework and negotiate firmly while still allowing the seller to maintain a measure of dignity. Be totally prepared to walk away if the seller has not yet realistically valued their business.

Often what happens is that they will test the market and the market will correct their expectations. They will often return to you and continue negotiating as they now understand that you are their best option.

Scenario 2 – A Competitor Wants to Retire

Some of your competitors may decide that they have had enough and they are going to retire.

This scenario presents you with all the same opportunities as in scenario one but how you approach this scenario is going to be very different. Remember the motivation of this competitor is different. They may not be in financial difficulty at all and therefore they are going to be turned off if you approach them and try to offer a low ball amount for a business that they have made their life’s work.

Their motivation for selling is that they were going to retire anyway at some point and this bear market has given them the excuse to finally do it. They are often tired and really don’t want to go through another bear market. If they have been in business for 30 plus years this is probably the 6th or 7th time they have faced these kinds of economic conditions and they just don’t have the stomach for it.

Make no mistake, that does not mean that they are going to fire sell everything and it also doesn’t mean that they don’t care about their employees, customers or the legacy of their business.

When you approach this scenario, position yourself as a trusted friend who will care as much or more about their employees, customers, and their business. Do everything you can to create a win-win business opportunity for the soon to be retired seller and for you.

Negotiate in such a way that motivates the seller to make needed concessions so that you can profitably grow after the merger in exchange for the way you and only you can take care of their employees, customers, and how you will honor the legacy of the business that they built.

At times it can be advantageous to have the seller stay on in a part-time or consultative capacity to help make the merger a success. Personally, I prefer only a short-term consultative arrangement.  It can be difficult for a person with 30 plus years as the boss to relinquish control and it can be confusing for the employees and customers.

Scenario 3 – A Competitor is in Financial Difficulty but Not Selling

Some of your competitors are going to be in financial difficulty and will be wanting to eliminate parts of their business to save money and streamline operations.

This can be a wonderful win-win scenario. The seller gets to offload something and balance their budgets and you get to acquire something overnight that may have taken you years to develop on your own.

Often times you will grow your customer list and you can cross-sell these newly acquired customers with the products and services that you were selling before you made this acquisition and you can sell this newly acquired product or service to your existing customers creating geometric growth.

In this scenario, it is ideal to have the seller provide support as you master how to sell this newly acquired product or provide this new service.  That support can come in technical knowledge, training of you and your staff, and even having the seller communicate with the customers on your behalf directing them to your website or phone number for a period of time after the acquisition to reduce attrition of customers and sales.

The Four Things You Need More Than Money 

You might think that you need lots of financial resources to execute on these strategies. But honestly, there are several things that you need more than financial resources. The more you develop in these areas, the less financial resources you need to be successful.

  • Mindset – You need to have the correct mindset about the bear market, bear markets are primarily fueled by fear, pessimism, and speculation. You must see this as an opportunity and you must be courageous. Remember though that there is a big difference between being pragmatically optimistic and being foolish.
  • Due Diligence – This is a fancy way of saying “DO YOUR HOMEWORK!” You need to know more about the acquisition than the seller does. Although I don’t recommend being adversarial I do think that the expression, “know thy enemy” applies.  In other words, know who you’re going to approach, why you are going to approach them, how you are going to approach them, and what outcome you are looking to achieve before you begin negotiating. I will say it again, get professional help before, during, and after you execute on one of these strategies.
  • Negotiating Ability – As I discussed earlier, there are specific strategies that you need to use when approaching and negotiating with a potential seller. You must understand WHAT will motivate them to want to negotiate with you. Once you understand what will motivate them you will have to decide HOW to use that information. One of my mentors always said, “it is a sacred trust, you can use this information for evil or for good but remember that people have a long memory and are much more motivated to do you harm if you abuse them.” In other words, drive are a hard deal, don’t overpay, but do all you can to create a win-win for everyone involved.
  • Creativity – This is by far the skill that will reduce how much money you will need the most to execute on these strategies and achieve geometric growth. In fact, you could acquire a soon to be retired competitors entire customer list for less than $1000 or you can buy an entire business with no money down and no money out of your pocket. If you get creative there are ways to accomplish this.

I will be expanding on the ways to creatively acquire businesses during a bear market with little to no financial resources in an upcoming podcast episode so please subscribe to the podcast today so you will be notified as soon as the episode goes live.

Bear markets should not be feared, they should be embraced as a rare opportunity for geometric growth for your business. I wish you great success as we navigate these difficult economic times. None of us know what will happen next but historically more money is made during and immediately after bear markets than any other time in the economic cycle.

Don’t fear the bear!

Be pragmatically optimistic, get creative, do your homework, enlist the help of professionals and achieve geometric growth during this challenging but rare opportunity.

Author: Jamie Irvine

My name is Jamie Irvine and I have been a Sales Professional since 1997 and an Entrepreneur since 2009.

View all posts by Jamie Irvine »

2 Replies to “How to Take Advantage of a Bear Market”

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.