Zen and the Art of Exit Strategy

Upcoming Article on the ABC's of Selling Vocation Career Colleges

Just to give you a sneak preview of what I'm working on..

Realized that I haven't seen a good article on how retiring baby boomer owners of vocation career colleges can prepare their business for sale.

Some of the key areas include:

  - Why accreditation / funding affects not only value but whether or not you can sell

  - How key team members can make or break your successful transition

  - When should school owners start planning their exit strategy

  - What documentation is absolutely essential to satisfy buyers

Here's a recent listing for a local community college for sale

What You Need to Consider in Buying a Service Business

While service businesses offer a lot of advantages over more product-based ones, there are certainly challenges worth considering.

I would emphasize that buyers need to carefully consider whether they enjoy customer / client service since interacting with them is the most essential part of the business' success. Or maybe not - if they have to think hard on this, maybe the answer is right in front of them!

Many of the businesses we are current representing may be considered service businesses, as they have limited fixed assets & equipment / inventory. Click here for a complete list.

Here's an excerpt from a recent article that I thought worth sharing. It is used here with permission by Richard Parker, author of "How To Buy A Good Business At A Great Price(c)”:

Here Are 14 Key Issues To Consider When Buying a Service Business

1. It may be more difficult to obtain non-seller financing in this segment because there will typically be less “hard assets” such as machinery and equipment that some buyers and third party lenders want in place.
2. You should be the type of person that is comfortable with offering an intangible type product or service for sale.
3. Customer concentration can be a factor. Many service businesses were started by entrepreneurs who simply turned their prior job into a business and may have built the business with a limited customer base, especially if the service is sold to businesses and not consumers. You will want to be sure of and have some protection in the deal terms that will ensure these relationships will continue after you buy. The seller of the business may be “the business”. If the current owner has built long-term relationships with the clients and they (the customers) see him as the face of the business, will the business transition successfully to you?
4. What are you really buying? Is there some element of exclusivity to with the product or in the region?
5. Are you more comfortable dealing directly with consumers or businesses? Make sure that the business fits your strengths and preferences.
6. How easily can a competitor enter into the business? What are the barriers to entry if anything?
7. Is there an “800 Pound Gorilla” in the business – meaning a huge competitor who can ultimately impact your business?
8. Is the business limited to where it can operate or is expansion a viable option to grow?
9. How easily can any employees quit and become your competitor?
10. What can you do to build the business? Can you add additional products/services and sell them to the existing customer base?
11. During the due diligence phase be certain to investigate the suppliers, customers, and contracts in addition to the financials.
12. Include a rock solid non-compete clause in any contract.
13. Allow yourself enough of a transition/training period with the seller.
14. After you take over don’t make any drastic changes; you must learn the peculiarities of the business first.  

How Buying a Business Can Help You Get a U.S. Visa

Wrote an article a while back (contact me for your free copy) about how buying a business can possibly be the fastest and for some folks the most inexpensive way to get a U.S. visa, aka E-2 visa. Here's the HubPage.

Buying a Proven Formula with Franchises vs. Starting from Scratch

Recently listed a submarine sandwich franchise -

    http://www.bizben.com/listings/137766.php

Here's a good article by Richard Parker of Diomo on "Buying a Franchise - the Good, the Bad, the Ugly!"

   Each vehicle offers something for everyone wanting to own a business; some folks need to have more structure, as franchises offer with their proven formulas, others want more freedom and room for creativity in their business model.

   As the author talks about, it's ultimately up to you as the individual to decide what matters most to you!

Crisis or Opportunity ..?

Over the recent weeks I've had several folks ask me how are things going? (I think the implied question is "are people still buying businesses?")

There is an old Chinese fable about a farmer who finds a herd of wild horses, and everyone tells him what a blessing this is. His response is merely, "sometimes what seems like a blessing is really a curse."

The next day his son falls off one of the horses while trying to ride, breaking his leg. The farmer's wife is upset by this misfortune that's fallen on them. This time the farmer says, "sometimes what seems like a curse is really a blessing."

Sure enough, war spreads across the kingdom, and every eligible male is drafted. Because of his injury, the farmer's son is passed over.

If you look at the success of folks like Warren Buffett, here is someone who didn't make his fortune by following the herd. He benefited from the herd mentality by buying when there was blood in the streets.

"Many would-be buyers let fear stop them from making a decision to buy a business. They don't think of buying a business as an investment, they only think of the risk," says Steven Benson of VR Business Brokers in Huntington Beach. "[In reality] ..buying a business is the only investment where a buyer can control their own success."

Steven points out that the 90% of business deals involve some form of financing. When there is financing involved, the business actually pays off its own debt.

I agree with Steven that this is in itself should be plenty of reason to buy a business. What other investments out there will do this? or have the sellers secure your financing?

But going beyond this, what other investments allow you to directly affect the value by improving the business using your talents and background?

It is often said that the Chinese word for crisis consists of the characters for risk and opportunity. The question is which one do you see?

Something Lost in the Translation

Saw this upcoming SCEA event on exit strategy ..and recognized the same problem I've run into promoting my own talks on this topic -

#1 business owners don't see the need for exit strategy planning (ESP) until it's too late. It's probably a bit like the first folks being sold insurance ("you want me to pay money for what?")

Luckily, the companies that are playing in the Major Leagues - the M&A level - are usually playing with VC funds. And these are not folks who leave such things to chance.

The problem is that many of the small to mid-size businesses, aka the lower Middle Market, do not have advisors who understand the need, much less the experience to make sure that an exit strategy is developed that benefits the owner.

Left to their own devices, the owners keep plugging along, working hard to make customer / clients happy, to make sure employees are motivated, and so on. Meanwhile, time is passing by, and the clock should've started for such following examples:

• Implementing the new more tax-favorable entity structure
• Adopting the new accounting method to better reflect their cash flow
• Signing the buyout agreement to ensure a smooth transition when one of the partners unexpectedly leaves
• Bringing aboard the new marketing VP to round out the team

The list goes on..

Part of the problem is that many issues can be involved. But the simple basic reason is that "if you fail to plan, plan to fail!" While these captains of industry are at ease manning the helm of their business strategy or the latest market campaign, perhaps the problem is that exit strategy planning deals with more finances of a personal nature. And to some degree this remains perhaps the last taboo topic.

Most of us are comfortable now talking about everything and anything from health to marriage to even sex issues. But ask a person about their personal finances.. you may as well ask them strip down in public!

While doctors and lawyers work in fields where client confidentiality is a highly-guarded mainstay, maybe the problem is that having this spelled out in a similar fashion is something missing in the business advisor / financial field.

In fact, it is a specific exception - "When an attorney is not acting primarily as an attorney but, for instance, as a business advisor, member of the Board of Directors, or in another non-legal role, then the privilege generally does not apply"

So, basically, we have an unholy trilogy - perceived cost / complexity / no sense of urgency. No wonder why most small to mid-sized businesses flame out or get inherited as a sorry state of affairs!

New Article - 8 Secrets for Getting Top Dollar for Your Drycleaning Business

Recently listed two drycleaning businesses -

One located in prime North Beach / Fisherman's Wharf shopping center -

  http://www.bizben.com/listings/126211.php

Other with a motivated seller of location near new Federal Building -

  http://www.bizben.com/listings/127678.php

In my new article, "Eight Secrets to Selling Your Dry Cleaning Business for Top Dollar and Least Hassle," I cover such topics as why pricing too high can cost you more, how disclosing environmental issues like contamination and Perc surcharges protects, and confidentiality saves time. Contact me for a copy today.

Long Live the Four-Hour Work Week!

For those of you who haven't seen this book by Tim Ferriss yet -

http://fourhourworkweek.com/index.htm

..the "4 Hour Work Week" picks up where Randy Komisar and his work "The Monk and the Riddle" left off in exploring the idea that most of us put everything on hold with our "deferred life plan."

So, Tim asks the question "what if we have mini-retirements?"

   http://www.getrichslowly.org/blog/2008/06/03/how-to-take-a-mini-retirement-tips-and-tricks-from-timothy-ferriss/

If so, what would it take to support such a lifestyle?

Well, recently we listed this business that's ideal for an executive who's tired of the 9 to 5 Rat Race, working 50 to 60 hrs a week and making his company or others wealthy but having very little to show for it.

What if you could work just a couple of days a week and still earn six-figure incomes? That's nearly $ 651 / hour!

Too good to be true? Come check this out -

    http://www.bizben.com/listings/125310.php

[Post-Note: Coincidentally, I ran into Tim last week at our weekly event in the city. http://organictangosf.info/cs_SF.htm 

Being fellow tango addicts, we chatted mostly about the Bay Area dance scene. This week our non-profit project-tango.org is hosting the annual tango event -  www.sftx.info]

Win-Win

One of the most satisfying part of my work is helping BOTH the buyers & sellers meet their goals on a deal.

Buyer, Steve F - "It was really good working with you, you made the challenging task of finding the right business seem easy."

Sellers, Gary & Susan - "It has been very rewarding to work with you, as you have been extremely patient and understanding of our needs in this unstable economy.  You have also led us in a direction that has not been overwhelming during the sales process, understanding that we are continuing to operate our business. You made the whole process simple and yet took on the unpleasant task of the paperwork and preparation for us with ease and ability. Thanks again for all your hard work."

Selling Your Business Yourself

Currently in escrow for a custom glass business. The owners were originally trying to sell it themselves. http://snipurl.com/203du

We'll check in with them later and get feedback about how our services have helped them.

Often, I find that while business owners know how to sell their products & services, they find out too late that selling their business is another story.

In May I'll be hosting a seminar for business owners on how to sell the business themselves. Stay tuned for more info!