Terry Monroe

The $30 Million Dollar Sale & Pennies in Your Pocket

Posted on 21. Jan, 2010 by Terry Monroe in Advice, Business, True Stories

I heard a story recently from a very successful businessman and friend of mine that literally made my mouth drop open. Now, I am in the business of selling businesses and have been for many years and with me being in such a business I love hearing and reading about individuals who have started out in life without a lot of formal education nor a silver spoon in their mouth and have been able to go from rags to riches. It is always good to hear such stories and it is even more interesting if you actually know the individual instead of just reading about them.

This is the case of my friend who started out with nothing and worked his tail off in several different businesses and through luck and his intelligence to realize he had a good thing worked and built his business into a very profitable company. And to add to his luck another company came along and realized what a good job he was doing and wanted to acquire his company.

As he explained the transaction to me the two companies had synergies between them that made the two of them a good fit and they began the due diligence process, whereby the acquiring company inspects all of the details of the selling company to verify all of the numbers and the things that they had portrayed about the company was true. After the due diligence process was done then the financial numbers were stated and the price was set between the two parties based on the EBITDA of the company. EBITDA means earnings before interest, taxes, depreciation and amortization. It is the true net income of the company and once this is determined then a buyer and seller come to an agreement on what the multiple is (every business is different, but for convenience stores with real estate it is generally between 4.5 and 5.5 times the EBITDA) and that is the selling price of the company.

As the story continues the eventual selling price was $30 MIL. Now in my book and most people’s book $30 MIL is quite a bit of money, especially if you don’t have any debt against the company and as the story goes he didn’t have any debt. So I know you are probably thinking the same thing I was. Wow! This guy has got it made how can there be a problem with this story? Well as he continued to share with me the deal was closed in January and the taxes that he was going to have to pay on the sale of the company were not due for 15 months. Meaning that if you get the income on January 2008 then you would not have to pay the taxes until April of 2009, but the tax amount was based on the sale price of $30 MIL that took place in January of 2008. (Please keep in mind that the dates have been changed as to not reveal the company or the person in this story). And I didn’t ask, but I assumed that the selling entity must have been a C-Corp, because he said that the taxes that were to be paid on the $30 MIL was $12 MIL (40%) so let’s assume that it was a C-Corp. But as he explained to me that was not a problem, because he had fully invested all of the $30 MIL so that he would have the money available to pay the taxes and then some more, because he could work off of the $30 MIL and make more money in the 15 months before the taxes were really due. So far so good.

Fast forward 15 months later to when the taxes were due to be paid and guess what? The $30 MIL that had been invested was now down to $15 MIL. I didn’t ask him where he parked the money, because it would have been too much torture to put him through. So now he has $15 MIL in his account, he owes the government $12 MIL, which leaves him with $3 MIL a net of 10% of what he sold the company for. Was he broke? No, but a far cry from the original amount of the sale price of the company.

So what is the moral of this story? BE PREPARED. As I mentioned earlier my friend was a very intelligent and successful businessman, but I imagine he got involved into the selling process of his business focusing on the top number and didn’t do a lot of preparing in advance with a team of experienced individuals in all aspects of the selling of a business. As an experienced business broker I would have coached my client far in advance as to what his tax implications would be and would have worked to structure the transaction as to minimize the amount of taxes he would have had to pay. Many times there are several ways to legally reduce your tax liability if start preparing early enough. Selling a business is a team effort that requires many people with specialized skills with everyone focused on the same outcome. Getting as much money as possible into the seller’s pocket. A very simple goal. But must be executed in the correct manner or you could end up like my friend. Big sale number, little money in his pocket.

Being too good isn’t always bad.

Posted on 09. Jan, 2010 by Terry Monroe in Business, True Stories

Since my occupation centers around helping business owners analyze their assets and coaching them on decisions as to whether or not they should sell all or part of their businesses, I tend to see a lot of bad things. Additionally, I also coach buyers on what to look for in a business and how the process of buying a business works based on my knowledge of having owned and operated several of my own businesses. So it is not uncommon for me to skew to the negative side of things and to look for warning signs that could potentially hurt either party in a business resale transaction. I work hard to seek out, identify, and mitigate the impact that these risk factors may have to either party.

However, sometimes you don’t always find things that are bad, and I thought that during this time, of all the doom and gloom of our present economy, I would share a story with you about an operator that stood above the crowd and is inspiring to myself and others.

Several years ago, before I began to specialize in the sales and acquisition of convenience stores, I worked as a transactiontional broker in multiple industries. One of which was the hotel and motel industry. At the time a friend of mine happened to own a boutique hotel in the Caribbean on the island of St. Croix, U.S. Virgin Islands. One day he mentioned to me that since he had owned the hotel for several years he had decided to sell it so he could spend more time with his family. I agreed to help him and immediately began to review his books and records. One of the first things I noticed was that he was doing a good business…a very good business. By that I mean he was running a 90% occupancy rate and had been for several years.

It wasn’t like he’d just had a good year or two; he had been having very profitable years for quite some time. When I asked him how he had managed to get the occupancy rate to 90% and keep it there, he said that over the years during the slow seasons he would make several small changes to the property to maintain a fresh business. Every six months or so, he made sure to do something different to his hotel. It could be a new painting on the wall in the lobby or new trash containers or new towels, etc. But he would always make some change or add something new for his customers to see.

When I asked him why he did that, his reply was, “My customers expect to see something new all of the time.” He explained, “You see, even though a lot of my customers may be transient, many of them are not, because I work to keep them coming back to me every year. They enjoy their experience at the hotel and they want to see something different, even if it is a little thing.” He also mentioned to me that when occupancy would begin to drop-off he would personally go into the town and offer air conditioned rooms to the locals for a reduced price to help fill his rooms and continue to generate cash flow.

Wow, I thought. What a novel idea. He went and asked for someone’s business.

So I began to work at selling his hotel. I can’t tell you how many people I had look at his hotel. Finally I found a businessman and his son from Ohio who had seen the property, met with the owner and had even gotten the accountant involved in the sale of the business. But just when I was about to write the purchase agreement the deal came to a screeching halt. The buyer said that he could not buy the business.

I asked him why? Was it because of the asking price? Was there something wrong with the cash flow or the numbers of the business that did not look in order? No, it was none of those items at all. The numbers were great and the assets of the hotel were in excellent condition. The answer to why he could not buy the business still rings through my ears today as clear as if it was yesterday. He said, “I cannot buy this gentleman’s hotel, because he is doing such a good job of operating it that there is no more upside left for me.” He said, “I cannot begin to operate it any better than the present owner, because he has done everything right in operating the business and continues to do so even during the hard times.”

Astounding as it may sound, this hotel was the proverbial case of a car with eight cylinders running on all eight cylinders and doing so well that there was no more upside left in the business. The business was doing too good to be considered salable.

It wasn’t until some years later that I encountered this same issue again. I was contacted by a gentleman who owned about 12 convenience stores and had decided that he wanted to sell about half of them to reduce his work load. Here again when I inspected the quality of the physical assets of the stores and reviewed his books and records I discovered that I had encountered another “eight cylinder car running on all eight cylinders”.

The man and his team were great operators. Whenever something broke in the store or something needed replaced or maintenance on the outside, they fixed it. I could not find a blemish anywhere and most of the stores were over 5 years old. His merchandising and floor plan was laid out well and the store traffic flowed. Every time I visited a store they had merchandising specials throughout the store from different vendors. All of his stores were very profitable and operating well. I remembered the hotel in St. Croix and prepared myself for some tough sales. But I was wrong. I ended up selling all the stores he asked me to sell.

I know that the people who bought those stores were happy knowing that they were buying excellent running assets. And they were especially happy with the fact that all they had to do to maintain the stores success was to continue with the process of running the stores the same way that the previous owner had.

So what is the moral of this story? I think it is twofold. First, as an operator of a convenience store is your store (or stores) like an eight cylinder car that is running on all eight cylinders? Meaning, are you doing everything that you can do to ensure the success of each store achieving its highest sales capability? Or is it running on only six of the eight cylinders? Meaning, do you have room for improvement that you know would enhance the sales both directly and indirectly? If it is only running on six of the eight cylinders then the question is why? Why, would you not want the store to do the best as it can possible can?

Second, if you are a prospective buyer of a convenience store are you going to want to buy a store that is the eight cylinder car running on all eight cylinders where there may not be very much more upside in the sales, but you are assured you are getting a well running store? Or are you looking for a store that is only running on six cylinders and you happen to know how to make it run on all eight cylinders by enhancing the sales of store through your expertise and experience?

I think the future of the convenience store industry is going to be dominated by the guys with the big eight cylinder engines. What do you think?

7 SIMPLE SELLING TRICKS THAT MAKE MONEY NOW!

Posted on 25. Dec, 2009 by Terry Monroe in Advice, Business

Know who your customer is and sell to that customer. I.e. Are they in their 30’s or 40′s or 50′s or are they Hispanic? Do the market research as to what the demographics of your area are and then buy merchandise and services that cater to that group or customer. If you don’t know what the demographics of your area is you can go to www.census.gov or for a more detailed breakdown of what is selling in other stores you can go to www.gasstations.com/products.asp and you will find a complete selection of reports that will help you in your business.
Are you using a shotgun or a rifle? Is your advertising and marketing the shot gun approach when you should be using the rifle approach? All too often we let marketing and advertising take a back seat to the daily operations of our business. Sometimes it is because we don’t either like or know anything about the marketing aspect of the business so we treat it accordingly. What is worse yet is when we think we know something about marketing and advertising and act like we do. For example I can remember when I was in the television and radio business that my customers would buy advertising that they liked. If they liked country music then they would buy ads on country music stations. If they liked the shows our TV station was running at a certain time they would buy their advertising to reflect their tastes in the programming. This not the correct way to buy advertising or marketing. You want to make sure that you are buying what You CUSTOMERS like and not what you like. So read number 1. Of this report and then use the rifle approach and implement the marketing and advertising that is reflective of your customer’s tastes and wants.
Can’t sell from an empty cart. Where’s the inventory. Our company just sold a liquor store in a small town and for American Business Brokers to sell a liquor store is not anything unusual we do it quite often. But what caught my attention in this sale is that the sales of the stores was about $1,800,000.00 per year in a town of 6,500 population and the owner of the store was an absentee owner who lived in another state and he had only owned the store for 3 years and when he bought the store it was only doing around $1,000,000.00 in sales. He had increased the sales by over 40% and he didn’t work in the store. So how did he do it? He said that he increased the inventory. Now, I am sure that there are other things that this person had done to increase sale, but his main reply had always been that he increased the inventory so his customers always saw a full and well stocked store. Make sure that your shelves are well stocked and faced forward. If you have to much empty floor space. Consolidate it to make it look fuller. More inventory means more sales. Don’t let your store look like it is going out of business when you are trying to increase your business.
Are you giving them a reason to come back or spend more money with you? Whether it is retail or online give them a reason to spend more money with you. The easiest person to sell is someone who has already done business with you. Either give them a bounce back coupon or offer additional items you have for sale as you are closing the sale. Stick a flyer in their sack or email it to them, but let them know there are other items you have for sale and you are willing to even give them a discount if they will continue to purchase from you. Remember they have money and they want to buy from you or chances are they wouldn’t have bought from you the first time so don’t deny them the opportunity to continue to buy from you again and again and again.
Raise your prices. Yes, raise your prices on items that are non essentials or un- priced. When was the last time you did a market survey of your competition and what they were charging for sodas or candy bars or health and beauty aids? Chances are you maybe under priced in the market place. What if you are little bit to high now compared to the market place. Well don’t drop your prices remember it is called a convenience store for. Reason not Wal mart.
Be sure to educate your customers every chance e you get. By this we mean with price signs on the MPDs, on the soda milk candy bars everything to show them what is for sale. If a bunch of inventory is just sitting there it needs help. Promote it with visual aids. Don’t assume that your customers will see the items and the want to pick it up. Give them a reason to take action. Use vendors point of sale materials, have a sign maker make some up, use neon paper, even colored pens on the windows. It really doesn’t matter what you do just give the products a push
Give stuff away. Always have a drawing going on for something all of the time for anything. It can be an Elvira stand up that was used for selling beer or a basket of salty snacks or a soda & hot dog a day for a week. Get your vendors involved and get stuff to give away. And by the way you may want to keep the entry forms with their email address just in case you decide to start a marketing campaign.

Bonus:

Ask, ask and ask them again to buy something when they are at the counter checking out. Even the slightest bit of suggestive selling will drive profits. And believe it or not customers appreciate it. They like to know if there any specials or good deals they can take advantage of.

What is Your Trick Pony?

Posted on 19. Dec, 2009 by Terry Monroe in Blog, True Stories

I have been in business for quite some time and I have been around the block a few of times too. With this amount of experience, it is sometimes easy to think that you have just about heard or seen all there is to hear or see. But the other day I had a client of mine, who is a very successful multi store operator, throw me a curve ball.

We were talking about a business that he was thinking about acquiring and right out nowhere he looked at me and said, “Well, what is their trick pony?”

I hope it wasn’t too obvious that I had no idea what he was talking about as I stood there with my mouth hanging open. The remark caught me completely off guard. But having ridded myself of the fear of looking completely ignorant a long time ago, I said to him, “I don’t have a clue what you are talking about. What is a trick pony?”

He explained to me that a trick pony is something that business owners, sellers, or marketers use to enhance the sales of a business.

OK, now I knew what he was talking about. In sales this is called a unique selling proposition or USP. In other words, a hook.

Once I understood what he was talking about, I could then begin to dissect the sales figures and figure out what the trick pony was for that business he was considering to acquire.

Most really successful businesses have a trick pony, a hook or a USP. For example one of the most well known USP’s was Domino’s Pizza delivered to you in 30 minutes or less or the pizza was free. Also popular was Federal Expresses “When something absolutely must be there the next day” slogan. These are only a few of the many different hooks that have been used to break through the clutter of the customers mind, grab their attention, and ultimately grab some of their money from their pocket. And in today’s marketing it is even worse than when Domino’s and Federal Express were getting started.

How about you and your store or stores. What is your trick pony? I have seen some convenience stores use soda as a hook: “Any size of Soda 59 cents”. Some will use coffee, some even use bananas. The point is that every store should have a trick pony otherwise what is going to set you apart from the next guy? Probably nothing. And that may be why your sales are about the same as the other guys too.

Don’t get me wrong I am not being critical, just the opposite. Through my travels and meetings with so many convenience store owners across the country I get to see a lot of different stores with fresh eyes and I want to be able to share that information with you.

I suggest you take a walk out into your parking lot and take a look at your store from that angle. See it as the customer sees it. Actually walk through the sequence of events that a customer would and experience your store from their perspective.

Remember the customer that frequents your store in the morning is different than the customer who visits your store at noon. And those are both different from the customer who visits your store at night. You really have 3 different types of customers so the same trick pony probably isn’t going to work for all three of them.

Nobody said that this was going to be easy, but it will be more profitable to you.

I will bet you that Tom Monaghan of Dominos and Fred Smith of Federal Express are glad they came up with a trick pony.

Are You A Convenience Store Owner Who is an “In Between”? The story of an over achiever who lost their way.

Posted on 17. Dec, 2009 by Terry Monroe in True Stories

To begin with what is an “In Between”? It is a term that is used to describe a business owner that is no longer a 1 or 2 store operator, but because of the number of stores they own or the overall industry they are not longer considered a big player either.

Most convenience store owner operators started out in business by either building their businesses from the ground up or by buying or building one or two convenience stores. Then after a while they get the hang of operating stores and understand the nuances of the business. What vendors to use, what prices to charge to get the best gross profit margins and what items generally they should be carrying for sale in their stores.

If luck is with them and they are pretty good at what they are doing and they work hard they will have a profitable business. Then the proverbial light bulb will come on. Wow, they will say to themselves. We have worked our tails off and now we have 2 stores that are making money and it really isn’t that hard so we can only imagine how much more money we could make if we had more stores. So the game begins. It becomes evident in their mind that to be really successful like the Wal-Marts of the world all they need is more stores. It becomes an obsession and their focus begins to slowly change from the operations of the 2 stores to the finding of possible locations to build another store. Forget the fact that they have never built a store from the ground up before, but they have decided that this is the way to go so they search and search until they find the ultimate piece of property for the perfect store they have been fantasying about.

Alas, they finally do find the location and since they have never built a store before and they are uneducated about the process that will need to take place for this creation to happen they somehow manage to convince a bank to loan them the money based on the success of their other two stores and for the construction of their new store. Of course they have put the equity of their two stores and everything else they have up for collateral so that they may build the new store, but that is OK, because they are going to be wildly successful with their new venture. Their vendors are on board with the new project since they want to sell more products so they are forthcoming with advice and constructive criticism. Finally after all of the construction delays and cost overruns the store is finished and opened to crowd of new customers who are thrilled to spend money at the new store. Or at least that is what they had envisioned during time they were building the new store, because that is what they have needed to make this new venture work.

The truth of the matter is that with the new store they have hocked everything they own and a good portion of their future to build this new store and the new store is not performing like they thought it would. Sure it makes money, but nothing like it was supposed to in their mind and as a matter of fact even though it is growing its sales every month it is not always profitable and actually takes some of the income from the other two stores to help it along some months. Egad, what is a person to do? Well the solution is really quite simple. We need more stores. We could never sell the new store, because we just paid an outrageous tuition to get this thing built and it is not reached its full potential in profitability and now we know how to do build stores. Since now we know how to deal with the bureaucracy of the local and state governments to get permits and plans approved for construction and how to deal with those greedy contractors who keep coming up with different ways to add costs to our project and invent those things called “change orders” which add more to the overall cost of our project and now we know how to present the financial proformas to the banker so that they will loan us more money and we will not have to explain what a veeder root or Ruby system is for the 10^th time and now we know that we don’t need to allocate all of that space in our store for the new product lines that the vendors said that all new stores need to get the extra profit that the big guys are getting. No, now we know how to build stores and that is what is needed to fix this little issue of the new store not performing like we thought it would.

Yes, we need more stores. But building new stores is not the complete answer. Yes, building new stores will help our situation, but that will take a long time and we don’t have a long time. Sure we can build one when we find the perfect property, but to fix this issue now we need more stores so we need to go on the hunt to find more stores to buy. Since we know how to build and operate stores based our first two stores we started with (both which are still profitable) we believe in our minds that any stores we should buy whether they are great stores or not great stores will be great stores after we get a hold of them. So we begin the pursuit of finding stores to buy.

You see, building and searching for stores to buy is a whole lot more exciting and fun than managing and operating a store. Heck, we already know how to manage and operate a store and that is old stuff and on top of that we have a couple of good managers who are watching the stores for us and who are keeping all of the employees in line and making sure that things aren’t walking out the stores without being paid for. We have got things covered so we can focus our time and energy on the big picture of becoming a multi store operator just like the big boys and we will be in the big money and we will have a general manager to watch over the employees and the payroll and the marketing and hiring and firing and ordering of fuel and merchandise. That is how it is supposed to be done.

Now, before I go on with this story you are probably wondering why don’t we just stop right there and get these 3 stores all lined out and get everything under control before even contemplating growing this business. Well, the reason why, is the desire to grow and make a business larger can be a sickness and sometimes can develop into a disease if the desire to acquiring more stores and growing the business becomes the drug of choice. Never mind all of the reasons and justifications you may want to apply to this sickness when an individual has the desire to grow the only drug that will satisfy the urge is the growth of the company and more stores.

Now they are on the hunt and are out to buy more stores and guess what they find? More stores to buy and they begin to acquire more and more through different and sometimes creative ways of acquisition and before too long we now have 17 stores. Not bad for only starting with two stores to now have 17 stores. Never mind the fact that there is very little if any consistency in the floor plans or sizes of the stores or the type of equipment by manufacturer to help conserve costs for maintenance and repair. And never mind the fact that some of the ones we acquired had a franchise food service program, which we can’t get out of and is not profitable. We can justify that by saying we needed to test these kinds of programs anyway for future use. And never mind the fact the stores are not all located in the same market and now cover a minimum of 3 different markets and require us to have a regional manager who may spend 35% of their time just driving from location to location instead of being on site at a location to help improve sales.

Basically, we have situation where we have a chain of stores that are generally out of control in regards to ultimate profitability on a per store basis. The chain was grown to satisfy a need of the owner and even though it may be profitable it is not at its fullest capability and while the chain was being put together the original two stores are no longer the most profitable stores of the bunch instead what has happened is the sales of the two original stores has been reduced to the average of the other stores which is not the greatest either. Alas, the first 2 stores are average. And we all know the definition of average. “Average is the best of the worst and the worst of the best”.

So now we have what I call an “In Between”. The owner of the 17 store chain got what they wished for (more stores), but they are not a small owner operator with a couple of stores nor are they a big chain of stores, because since the time they got into the business the industry has changed dramatically due to rising costs of products, employee costs, lack of capital in the market place to assist in buying or building new stores and the overall economy has forced operators to be extremely efficient or perish. What they are is an “In Between”. They are “In Between” the big and the little and they have an infrastructure for this 17 store chain that could easily accommodate more stores by only adding another person in the office or another person in operations to oversee the new stores, but guess what? They are tired and they have burned through a lot of time to get to the 17 store size and they know that it will take more time and more money to get to the next level. But the question is. What is the next level? Is it 30 stores, 50 stores, 100 stores and even then will they not be facing the same thing that they are facing now? Will they still be an “In Between” and still chasing the proverbial carrot at the end of the stick. Deep down in their heart and mind they know that some of the stores need replaced or sold or closed, but that would be admitting defeat and they are not a quitter. No we need to keep those stores open, because they help pay the administrative overhead and we don’t want to have to face the people who have worked for us for many years and tell them that we don’t need them anymore. Yet, we don’t have the ambition or time or money to go out and build or buy more stores. At this point in the game when it should be about maximizing the stores and making them as profitable as possible even if that means we should be closing and selling off underperforming assets it is instead about maintaining. Working to maintain the quality of life that we worked to grow accustom to. It may not be the jet setting type of lifestyle that the proverbial big boys probably enjoy that we read about in the trade magazines, but it is a good life with all of the amenities that an independent business person could ask for and there are the occasional trips to some wonderful places for get togethers with other people in the industry and trade shows and sometimes maybe a vendor will spring for a trip or an outing that is fun and free. So why rock the boat? Why not let things continue on and just enjoy the ride. Heck, we deserve it. We worked our tails off to get what we have and we are going to enjoy it.

You want to why this isn’t going to work? Because “nothing stays the same”. Businesses, relationships, cities, and people. Everything changes. Things are either going forward or going backwards. Growing or dying. It is doing anything, but staying the same. It is an undisputable law of the world. “Nothing stays the same”.

And therefore by one’s own account they have become an “In Between”. Please do not take the term “In Between” as a negative comment, it is merely a term to describe a situation that unfortunately is very prevalent in the business world and can apply to many different industries, but it is a fact and can be considered by some a sickness. Fortunately there is a cure for this sickness. By taking the antidote called “reality check” and admitting that you may have some form of this sickness a cure can be implemented. The cure is to assess our present situation and decide that being an “In Between” is OK and accept the fact that we are never going to be the biggest guy on the block, nor are we going to go back to working behind the counter standing on our feet for 8 to 10 hours a day. No, instead we are going to do what we started out intending to do, but got sidetracked along the way and that is to be the best at what we do by making our stores the most profitable and successful stores they can be for what and where they are. And if they are not going to be profitable enough to justify themselves we are going to either close them or sell them off, because we are first and foremost a business person. And a business person runs a profitable business to the best of their ability and does not operate a charity facility. Charity is what one does with their time, talent and treasure and not what they do by keeping an unprofitable store open or part of the multi store operation when there better ways to capitalize on this asset rather than just operating it at a loss or breakeven. That is dumb. Just plain dumb and I don’t know any other way to describe it. There are always different situations to justify the reason to keep an unprofitable store open or in the mix of other stores, but even in those situations it is generally temporary.

So if we are to be an “In Between” congratulations, because we have made it farther than most people in business, but let’s make sure that we are going to be the best we can be and not just flounder around with the concept of owning a lot of stores. We don’t make any money from our ego and we can’t take our ego to the bank. So we may need to order ourselves some of the drug called “reality check” and take a big gulp to get us back in line with the world and onto the road to maximum profitability. Take a hard look of where we are in the market place of today and make the needed decisions that will give us our ultimate profitability.

Buying a Business? Get the Best or a Fixer Upper?

Posted on 12. Dec, 2009 by Terry Monroe in Advice, Business

Buying a Business? The Best or a Fixer Upper?

My occupation centers around helping business owners analyze their assets and coaching them on decisions as to whether or not they should sell all or part of their businesses. As such, I am privy to a wide variety of business information and I can tell you first hand, I tend to see a lot of bad operations. Additionally, based on my experience of having owned and operated several businesses myself, I also coach buyers on what to look for in a business and how the process of buying a business works. So it is not uncommon for me to skew to the negative side of things and to look for warning signs that could potentially hurt either party in a business resale transaction. I don’t enjoy searching for the negative aspects of business, but I know them and I work hard to seek out, identify, and mitigate the impact that these risk factors may have on either party.

However, I don’t always find things that are bad. And during this time, with all the doom and gloom of our present economy, I thought I would share a story with you about an operator that stood above the crowd and ran an excellent business.

Several years ago, before I began to specialize in the sales and acquisition of convenience stores, I worked as a transactional broker in multiple industries. One of which was the hotel and motel industry. At the time a friend of mine happened to own a boutique hotel in the Caribbean on the island of St. Croix, U.S. Virgin Islands. One day he mentioned to me that he was tired and since he had owned the hotel for several years he had decided to sell it so he could spend more time with his family. I agreed to help him and began to review his books and records. Upon initiating my review, one of the first things I noticed was that he was doing a good business…a very good business. By that I mean he was running a 90% occupancy rate and had been for several years.

It wasn’t like he’d just had a good year or two; he had been having very profitable years for quite some time. When I asked him how he had managed to get the occupancy rate to 90% and keep it there, he said that over the years, during the slow seasons, he would make several small changes to the property to maintain a fresh business. Every six months or so, he made sure to do something different to his hotel. It could be a new painting on the wall in the lobby or new trash containers or new towels, etc. But he would always make some change or add something new for his customers to see.

Wow, I thought. What a novel idea. He went and asked for someone’s business.

So I began to work at selling his hotel. I can’t tell you how many interested people I had look at his hotel. Finally I found a businessman and his son from Ohio who had seen the property, met with the owner and had even gotten the accountant involved in the sale of the business. But just when I was about to write the purchase agreement the deal came to a screeching halt. The buyer said that he could not buy the business.

I know that the people who bought those stores were happy knowing they were buying excellent running assets. And they were especially happy with the fact that all they had to do to maintain the stores success was to continue with the process of running the stores the same way that the previous owner had.

So what is the moral of this story? When buying a business you always have a choice. You can buy a business that is an excellent running business and all you have to do is show up and do the same things that the last owner was doing. This would be like buying an eight cylinder car that is running on all eight cylinders.

Or you can buy a business that needs some attention and some tender loving care and has more upside, but will also take more work to get the business tuned up and running well. This would be the eight cylinder car that is only running of six cylinders and needs work. In other words it is a fixer upper.

Either way you go you will always generally be farther ahead than trying to start a business from scratch and doing it the hard way. So go for it. Find the business that suits your taste and then decide if you are buying a fixer upper or one that needs only you and your time and begin to enjoy the journey.

The Money

Posted on 27. Nov, 2009 by Terry Monroe in Business

THE MONEY

As Stuart Wilde stated in his book “it is always, always about the money”. Regardless whether it is medical, communities, politics, businesses or time it is about the money.

Being about the money is not necessary a bad thing. Because if it is your money it is going to be very important and if it is somebody else’s money it isn’t going to be as important. If you don’t believe me just at some of the ex-clients of Bernie Maddoff.

That is why I never lose sight of the goal of ensuring that I get the most money I can for my client in to their pockets. Notice I didn’t say that I was working to get them the highest price for their business, because the highest price isn’t always going to be the most money that goes into an individual’s pocket and at the end of the day, which is the real goal. To be able to put the most money into one’s pocket. We are not after bragging rights here, but more for value.

There are many different moving parts that are involved in the sale of a business and if the process is not performed correctly it can cost a seller possible millions of dollars. Yes, I said millions of dollars can get lost in a sale that may instead end up going for additional taxes to Uncle Sam, your new found partner in the transaction who always wants and gets to be paid first. Sometimes it maybe, because the seller has not organized the proper team of individuals to help in the process of the selling of the business and some of the players are getting on the job training on someone else’s money. Don’t make the mistake of attempting something as crucial as selling your own business worth millions of dollars to a team of individuals who for them it maybe their first or second time in doing this kind of transaction and they are learning as they go. I have already paid the tuition for this school so that you won’t have to pay it twice. When you are dealing with possibly one of the largest material assets of your life that will have impacting results on your future don’t try to just wing it and place your fate into an erroneous position. And try to figure out the process as you go along. You will probably get the deal done, but chances are you are not used to doing these type of deals and probably don’t have the correct process or checklist to follow.

Your Business Has Outgrown You

Posted on 25. Nov, 2009 by Terry Monroe in Advice

(This is part 7 of a 7-part series on “Warning Signs That it Might be Time to Sell Your Business”)

The business has outgrown you. OK, this is a very humbling situation and most people tend to completely miss this situation, but I see it happen all of the time. An individual creates and starts a business and they are good at what they do. They find themselves in an industry that is taking off and they begin to do very well and they continue to do well over the years and before they realize it the business has outgrown them.

They still know how to operate the business and they are still good at selling, but they only have the ability and education to operate the business at a level that equal to their talents and abilities. Therefore they end up stymieing the true growth of the business. But that isn’t the worst part. The worst part is that the business has gotten more complex than when they started it and they need more sophisticated financial people and financial systems, but they don’t know where to find them or who to turn to for help. At this point the business begins the process of self imploding, because all of their team is generally working with limited capabilities just like themselves.

Their accountants are ones that they have had for years and they are going to continue to do the same things and they can’t help the individual grow, because they have the same problems he does. The same is true for all of the rest of the employees and advisers. So the business begins a slow death if the business isn’t sold or merged with a more sophisticated business to help take this business to the next level.

Beware, this one will sneak up on a business owner and unless the business owner has a strong self esteem they will not recognize it and their ego will keep them in denial and the business will be on the downhill slide. Be sure to be able to stand back and talk to one self and hopefully have someone who can help you recognize that it may be time to sell or merge this business.

If you find yourself in over your head, it might be time to sell your business.

Partnership Dissolution

Posted on 24. Nov, 2009 by Terry Monroe in Advice

(This is part 6 of a 7-part series on “Warning Signs That it Might be Time to Sell Your Business”)

Partners & Parties. Partners and parties are much alike in the world of business. A lot of times when you first got into business you needed a partner or a group of partners to get things started. This is very normal and a very prudent thing to do, because you get to syndicate the risk and it helps to excel the business with more talent and more money to help the business in its most crucial stages of the startup phase. At a party, there comes a time when the guests need to leave. The same is true in businesses with partners. At some point, a partner who helped bring you to the party needs to pick up their hat and coat, and leave the party. This is when things can get very interesting.

All too often when partners start a business they are friends or acquaintances (in the worst situations they are relatives) and things are great and everyone is having a love fest. But then, over time the reality sets in that this is a real business and everyone has to contribute something to the business. Just like everyone is supposed to contribute something to the party. Of course not all of the partners are going to see the same things or have the same views on all of the aspects of the business. This is normal, because we are all wired differently and we all have different agendas. But what happens when it is time to break up the party?

If there is not a buy-sell agreement in place (which would address this exact situation) and generally there isn’t such an agreement in place, then the party could get ugly. And it could very easily be the demise of the business if it is not addressed properly and quickly.

Don’t be the one who gets left out of the party or worse yet gets asked to leave the party empty handed and emotionally drained. Be proactive and accept the fact that the party was fun, you learned a lot and either take your toys and go home or be willing to give the partners some of the toys and send them on their way home. But be prepared, because eventually the party will be over.

Significant Life Impacting Events

Posted on 23. Nov, 2009 by Terry Monroe in Advice

(This is part 5 of a 7-part series on “Warning Signs That it Might be Time to Sell Your Business”)

Significant Life Impacting Events! Nobody likes to talk about significant life impacting events, but they do occur and they occur to all of us. What is a significant life impacting event you may ask? It could be a number of things. It could be a divorce, a death in the family, sickness of yourself or a loved one, it could be the dissolving of a partnership, the death of a pet, excessive business or personal debt, or perhaps the relocation of a loved one. There many different types of the situations we would call significant life impacting events. But sometimes these events that occur in our lives may be telling us it is time to move on and close the chapter on the present part of our lives and to do something different.

A recent psychological study was done with individuals who were in negative situations with a lot of negative components affecting their lives (i.e. gangs, domestic violence etc.). When these individuals were removed from their negative environment and placed into a more positive environment the change in behavior and results of these individuals was dramatic. It was proven that by removing someone from the influence of the negative environment they could be reshaped into a positive individual where they were able to use their talents and lead productive lives. But here was the flip side of the equation. They also learned that if that same individual that was taken from the negative situation and placed into the positive situation should ever return to the negative situation for a period of 14 days or more, the individual would return to the negative situation of their environment and all of the improvements that had been made in that person’s life would be lost and they would be back to square one.

So when a significant life impacting situation occurs, stand back and look at the situation with an unbiased view and see if it is telling you it may be time to move onto to another business.

« Newer Entries

Older Entries »