Why? Well one of the reasons is that business valuations have come down in price. Businesses that were selling for 3 to 4 times their net profit are now selling for 2 to 3 times their net profit. Or if they were selling for 5 to 6 times their net profit they are now selling for 4 to 5 times their net profit. This is a substantial reduction of price from a few years ago.

Now this statement is true in generally all of the business sectors such as the retail and service categories. Of course there are going to be some categories that really hot at a certain time that are selling for a premium, but generally this true now across the board in most of the businesses on the market.

The second reason I think now is a great time to be buying a business is that the cost of money is about as cheap as it is ever going to get. You can get a commercial loan to purchase a business for 5% or sometimes lower depending on your credit and the situation and the lender you are working with.

So let’s say that I have convinced you that now is the time to buy a business because the valuations are down and you can get a good deal on the purchase of a business and the cost of money is cheap.

But gee Terry didn’t you know that banks aren’t lending and it is hard to get a loan. If you said or thought that you would be absolutely correct.

Banks do have money to lend, but they have changed the rules on lending or should I say that the Federal Government has changed the rules for lending for them and therefore it has become more difficult to get a loan in today’s economic environment. Yes, all of this is true, but there is still a way to get that loan for the business you are wanting to buy. Yes, the days of getting a 100% loans are long gone unless of course you are working with private investors, but we are talking about a financial institutions today so I will stay focused on such accordingly.

Here is how you get your loan for the business you want to buy today.

Most lenders are sitting on top a pile of cash and they are in the business of renting money. Yes, that is how they make a good profit in the banking and lending business of money. They receive money from people who deposit their money into their bank and pay them a pittance for doing so and then they rent that money out to people like me and you for a profit. It is a very simple formula. Once I understood that banks were nothing more than renters of money it became a very simple formula to understand.

But since the Fed’s have changed the rules and told the banks they must be more prudent in their renting of money the banks have become more conservative in the way they rent out their money, but they still are in the business of renting money.

In the old days before the Fed’s came to town and changed the rules on renting money an individual could buy a business with 20% down and the bank loaning the remaining 80%. Sometimes the bank would keep the note themselves and earn the high interest rate they were charging for the renting of the money or sometimes they would sell it off to the SBA and only retain a portion of the loan thereby allowing them to keep money in their bank and repeat the process again and again. Either way it was a good deal for the individual that needed a loan to buy themselves a business.

Now though the rules have changed and if you have spoken to a lender recently you would then understand that they will are still willing to loan you money for that business you wanted to buy, BUT it better have a solid cash flow and they are not going to loan 80% of the purchase price. No, more than likely they are going to be willing to loan you maybe 50% to 60% of the purchase price of the business.

But wait you say. I don’t have much money! Heck, if I was buying a business for $500,000.00 then instead of having to come up with $100,000.00 (20%) now I have to come up with $200,000.00 to $250,000.00. That is crazy I don’t have that kind of money. Doesn’t the bank understand that I have good credit, this is a good business, there are no jobs to be had in the market place and if I had that kind of money I probably wouldn’t be in the situation that I am now?

Well to begin the bank doesn’t really care about any of that. All they are concerned about is keeping their job. So it is better to tell you no and keep their job than to make a loan to you that could get them in trouble and they lose their job and then they would be just like you (except they wouldn’t have as much money saved as you have) so this is what we call a lender making a career decision. It is easier not to make the loan and keep their job rather than to take a chance on making the wrong loan and possibly losing their job. (I actually had a bank President tell me that one time). But I am straying from the point.

The point is since there are new rules and the banks want more money down and you don’t have the money how do you get the loan? The answer is right in front of us. We are going to get the additional capital we need from the seller of the business. He should be aware of how difficult it is to get a loan in today’s marketplace and if he isn’t he must have been living without a TV or access to the internet to see what has been going on with our banking system. But just in case the Seller of the business is not cognizant of what is happening in today’s marketplace in regard to the lending environment then I would ask the Seller of the business to go visit his local and long established banker to ask him for a loan to refinance his business. Yes, have the Seller go down to his old banker buddy who he has had a long relationship with and have him ask him how much money he would loan him against HIS business. Now remember this is a business that is a good business and has been up and running for quite a while. This is what we would call a reality check, because the Seller of the business will find out real quick what is going on in the world of lending for businesses. Hey, if I am wrong about this then great everyone gets the loan they wanting and you can totally disregard this article. But I don’t think I am wrong on this one.

But back to getting that loan. Here again it is really simple math. First go talk to some lenders and find out what is their criteria for the loaning money for a business. Some will want 30% or 40% or maybe 50% as a down payment towards the purchase of a business. Don’t argue with them just get the details. Then work your formula backwards and when you have found the business you are interested in explain to the Seller that you are a qualified Buyer and that you have the needed funds available to purchase the business with the normal amount of funds needed being 20% and that in today’s marketplace that lenders are requiring 35% as a down payment and you will need the Seller to carry 15% of the purchase for a limited time. By this I mean have the 15% amortized over the same time period as the lender is requesting, but agree to refinance the 15% in a shorter term like 3 or 5 years from the date of the purchase of the business.

Some Sellers will not like this idea and will not go along with it, but a Seller who wants or needs to sell their business understands that it is much better to get the bulk of their money now and have the business sold than to just sit and wait and hope that things are going to change later and still not sell the business.

Good luck and give this idea a try if you are really serious about buying yourself a business and enjoy the journey. It is all great.

Oil seems to be on every bodies mind a lot lately both in the good sense and the bad sense, but regardless of what one thinks of the oil industry it is the #1 most efficient energy source in the world. And if we didn’t have it we would still be on horse and buggies or riding a bicycle to and from work.

The oil industry has always had a mystical aura about it in the fact that it just appears out of the ground and the thoughts of Jed shooting at the ground in the Beverly Hillbillies and it comes bubbling out of the ground. In reality this is not the case, but it does make for a good story.

I am not going to go into the many different reasons of why oil is a good thing, but I do want to address the bad publicity it has gotten in the area of risk that is involved when investing into the oil industry.

First I want to disclose that I come from a family that was born and raised in Southern Illinois who made their living working in the oil industry by drilling and servicing oil wells. I know people are never aware that there are such things as oil wells in Illinois, but there are approximately 650 oil fields and around 30,000 oil wells in the state. It is a dirty business and not very many people want to do this kind of work, but we are all thankful for the people who have chosen to work in this industry.

When most people think of investing in oil wells they think of dry holes and unscrupulous individuals like Snidely Whiplash hiding in the weeds waiting to prey on another suspecting investor with cash hanging out of their pocket. Again, another myth. The reality of investing in oil wells is that with this kind of investment you can at least visit the well site and see where your money was invested and talk to the operator who you invested with and find out the situation if it is either good or bad. Not so when an individual invests in the stock market or mutual funds. And that is why I wrote the article about the “10 Myths of Investing in Oil”

When people invest money they are either buying stocks or mutual funds or REITS or some other type of investments I can’t even pronounce and how do they do it? Either online with a computer screen in front of them or at an Edward Jones or Financial Institution’s office. And even then you don’t know what you are investing in. You get to meet a nice person to whom you write the check to, but that is about it. And is it risky? Can you say “Bernie Madoff?”

My point to the story is not to make light of investing in stocks, bonds, mutual funds, or CD’s or other financial instruments. It is only to let people know that investing in oil is no more risky and sometimes less risky than the many different financial products that is touted by the many financial institutions.

Relax, enjoy the journey and hopefully I have shared some information that will benefit you in some way.

Myth #1 – You can lose all of your money.

Truth – It depends on how you want to look at your money. In reality the money that you invest into the oil business is different than the money you would invest into the stock market or the purchase of real estate. When someone invests into the stock market or the purchase of real estate they are investing with “post” tax dollars. Meaning they are using the money they have left over after paying the taxes that are owed on the money they earned to make the investment. But when someone invests into the drilling of an oil well they are given preferential treatment from the federal government in the form of Tangible and Intangible investment allowances. What this means is that if you invested $25,000.00 into the drilling of an oil well you would be allowed to write off or deduct the Intangible amount of your investment off of your annual gross income 60% to 75% of your investment could be written off against your personal income) of the year you made the investment. In essence you could never lose all of your money, because it never was all your money in the first place. The government was going to get their part of your income regardless whether you invested into an oil well or not. Generally they were going to get between 35% to 40% of your income anyway. So when you invest into an oil well you are really using some of your money and part of the government’s money.

Truth – When you purchase stock from a stock broker or online in essence you are buying tiny piece of a huge corporation with millions of many different pieces. There is some comfort in knowing that it is a large corporation with holdings all over the world, but it also comes with a huge overhead to support. When one purchases stock in such a large corporation with their large overhead it takes a lot of movement in the market for one to make a substantial profit, plus you are buying the stock with “post” tax dollars so you only getting to invest 60% to 70% of the income you had earned. You have already given up a large part of your buying power before you even start. When you invest into an oil well it is called “Direct Participation” and that is what is happening. You are investing directly either into one oil well or a group of oil wells. Your investment is more focused on the production of oil and not on the running of a huge corporation. Your investment will have the chance to grow faster and larger when it is focused instead of thrown into a huge group where it is used to run the machine.

Truth – There are different kinds of drilling when it comes to finding oil. The type that most people have heard of is “Wildcatting”. It is what was talked about on the TV shows of Dallas and other movies about oil wells where the guy goes out into the middle of nowhere and when he is down and out on his last dollar hits a gusher of a well and it blows up in the air and everyone lives happily ever after like the Beverly Hillbillies. In situations like that where one is drilling in the middle of no known oil production the odds of getting a dry hole are probably more like 25 to 1 that you will get a dry hole.

The other type of drilling that is done and has a much higher success rate is “Developmental Drilling”. When you are doing developmental drilling you are either drilling next to or very near to existing oil wells or oil fields. This type of drilling is highly successful and can sometimes have a 100% success rate. When investing into an oil well be sure to clarify if the investment is a wildcat or a developmental drilling project. Chances are if you are investing into a developmental drilling project you odds of hitting oil and making money are going to be very good.

Truth – The best way to find out if you are getting a good investment opportunity is to do the research. Generally that is why people buy stocks and investments from a stock brokerage house or online service they have heard of, because they are not really interested in doing the research. An investment representative will ask them their tolerance for risk and take their money and invest it for them. Minimal risk. Minimal return.

When in investing into an oil well do the research. A for real oil drilling and exploration company will invite you to the drilling site and explain the risks to you first hand. They will allow you to hear what the geologist has to say in regard to whether the well is going to be commercial or not in his opinion. Legitimate oil operators don’t shy away from the investor who wants to learn more about the process of drilling and producing oil wells. They welcome the questions and comments and it allows you to get directly to the people who are making the oil well investment decisions and thereby increasing your knowledge of the oil industry and reducing your risk.

Truth – If anyone really knew how much oil an oil well would make before it was drilled do you really think they would be asking you to invest? Nobody knows. And I mean nobody knows how much an oil well is going to produce.  When a project is based on developmental drilling it is easier to get an idea and a possible range, but even then nobody ever really knows how much an oil well will make. All oil wells are different. They can be right next to each other and be totally different. And that is why oil operators share the wealth and the risk when drilling. Because of the unknown. Even the largest companies in the world like Exxon, Shell or BP share the risk when they are drilling new projects, because they too know that there is an unknown factor when drilling oil wells and it is better to have a piece of a lot of oil wells than have all of your eggs in basket per se with just one oil well.

Truth – Very rarely are the carrying costs to maintain and operate an existing oil well excessive. The exception is rare. The cost to prepare, drill and complete and oil well are expensive, but if an oil well is completed properly the cost to maintain and operate are almost minimal. There are some wells that may go a year or beyond before ever needing any additional maintenance.  Only when you have factors such as corrosive fluids or other chemical reactions down hole do you encounter excessive maintenance costs. It is rare that you will have excessive mechanical costs after an oil well has been completed. Your oil operator is also your partner when you are involved in direct participation oil drilling and they do not to be burdened with high carrying costs either. You can be assured they have already factored carrying costs into the equation, because they want the oil well to be a viable investment too.

Truth – Investing into oil wells is like when you buy stock. You are only liable for the amount of your investment. In the stock market if the company you invested in goes broke or has a product liability issue you are not affected by these issues other than your investment may go down or become worthless. The same is true when investing in an oil well where you have an operating agreement between yourself and the operator stating that you are not liable for any actions of the oil well and the operator is assuming the responsibility and liability. It is like getting the best of both worlds. You are on the ground so to speak in the front row watching your investment, but without any of the liability.

Truth – Oil wells have a very long life span. Oil wells have a tendency to begin with a higher rate of production, because in the beginning you are letting off the pressure that has been captured underneath the earth’s surface for millions of years and over time it is like putting a very tiny tube into the side of huge tire full of air whereby it eventually slows down to a slow stream and continues to blow out air. Oil wells are similar. After the initial pressure has been released there is still oil in place and some wells will continue to produce 20, 30, 40 & 50 years under their own pressure. Some oil wells will need to get a push later in life with an operator injecting water or some form of gas to give the oil a push and help it come out. But generally an oil well has a long life. The production won’t be at a very high daily rate, but it will keep going and going and going like the Ever Ready Battery Bunny.

Truth – Everything in life is cyclical. Things go up and thing and things go down. And the price of oil is not different. However, in today’s world the market place is different. We now have 1 Billion people in India with a 300 Million middle class that is evolving and we have 1.1 Billion people in China that has 300 Million middle class that is evolving there too and are consuming more and more energy to help their countries grow and prosper. Plus like the stock market oil wells are known to be long performers and continue to produce and give an economical return to their investors. In the stock market if the sales of a company should tumble and go into the negative column as it did with General Motors and all of the investors money was wiped out with the company filing bankruptcy due to low sales. In the situation of an oil well if the market price should drop below the amount needed to be profitable you can turn the well off and wait until the market price returns. And it always cycles back around again to profitability in the oil business.  You find after doing the math on the amount of money you have invested that over time before factoring in your tax benefits that oil investments generally have a very high rate of return.

Truth – An interest in an oil well is sellable, because it is based on cash flow. Just like a stock is priced based on earnings times a multiple an oil interest is the same way. The longer you own an oil interest and the more established the production becomes the easy it is to sell, because it has a proven cash flow record just like a stock in a company would have.

Truth – It is believed that all of the big oil or easy oil has been found in the Continental United States excluding the offshore oil which is yet to be discovered. But big oil and new oil is expensive. Because it is in hard to get to places and it is much deeper than the oil found in the past it is much more expensive and therefore it would cost a private investor considerably more to invest in this type of oil exploration.

But there are thousands of proven oil fields in the United States with oil reserves in place that have been sitting idle for many years. Fields that were abandoned when the price of oil had dropped and before new technology was invented to get the oil out with reduced costs and at today’s prices make the developmental drilling procedures of an existing oil field very profitable and cost effective in today’s market place.

As the conversation continued it was obvious that even with all of their foresight into the business of growing and nurturing their business to the next level it was of extreme discomfort to them of the thought of using a broker to assist them in the selling of these underperforming assets they had been discussing with me. Now, since I am a business broker and I make my living by assisting other people in such task as helping them to determine the market value of an ongoing business and prepare marketing materials that will enhance and present the business in its best light when presenting to a buyer I probably should have been offended by this individuals feelings toward a broker. But, surprisingly I was not. It is not that I am callous to the these type of remarks it is that I too can relate with their thoughts about the use of broker and certain things that we just can’t bring ourselves to doing even though we know that we should even when it is the right thing to do. Like not wanting to pay someone to pump our gas when we know we could afford it, but can’t bring ourselves to paying someone else when we know we could do it ourselves. Like not wanting to pay someone to carry our bags or briefcase at a hotel, because we know how to do it. Like not letting anyone else drive the car while we talk on the phone or write a note, which would be more efficient for us, but not wanting to give up the control of the situation, because we know how to do it. Lots of little things that we just can’t seem to let go of. I am not trying to reason as to why, only recognizing the fact.

So in response to my friend who had made the statement about not ever wanting to use a broker, because they could do it themselves I said. I agree with you. I don’t like to use brokers either. As a matter of fact it drives me crazy when I have to use a broker to sell anything for me whether it is a piece of real estate or something small that could be sold on E-Bay. I concurred with their feelings and agreed. Now needless to say this isn’t going to do anything for my cash flow in the world of business brokering, but it was how I felt and I wanted to be truthful with the gentleman.

However, regardless of how he and I feel about the use of brokers the issue of needing someone or something to sell the underperforming assets still existed. All we had done at this point was have a good conversation with ourselves, but the issue of needing to sell the convenience stores was still at hand. I then asked him if he had anybody on his staff that was familiar with the stores in such a way that they understood the basics of the operation of a convenience store and could read and understand a profit and loss statement for a convenience store and he said yes that he did. He said that he had an individual that had a basic understanding of the income and expense side of the business and had helped them build a couple of stores and was presently working  in their company in their real estate development and marketing side of the business.

I then asked him if the mentioned individual were presented with a prospective buyer for one of the convenience stores did he feel that they would be capable enough to work with the individual in supplying them with the needed information that a buyer would need to decide if they wanted to buy the convenience store and help them through the process of consummating the sale of the store and he said that they could do that. I then suggested that I had a solution to that nasty old broker situation that we both had discussed a few minutes earlier.

I explained to him that in order to be a successful broker it is not always about you the broker. True, you must have a pleasant personality and be reasonably educated and informed about the product or service that you are selling, but you must also have a system to get something sold. Having the ability to build rapport and work with people is very important, but without a system to back you up and guide you through the process of taking a buyer from the introduction of a business to the closing you must have a system and that is what makes a difference between the successful and not so successful brokers of the world. I suggested that if he had such an individual that he had mentioned earlier then I could probably help him in the selling of his underperforming convenience stores and implement  a systematic approach to the selling process and not have to pay a brokerage fee in doing so. He was intrigued and interested.

I explained to him in the respect of selling convenience stores there was such a system that he could employ on a cost basis that could supply him with a selection of services that would accomplish the same thing that a broker would use, but without the cost of a broker. The services available included marketing packages that had been designed specifically for the convenience store industry that conveyed all of the pertinent information that a convenience store buyer was looking for and the marketing tools that brokers use to get the businesses they are selling in front of thousands of buyers who are looking to buy businesses. I also explained to him that there was a book that could guide him through the process of what it would take to sell a convenience store and included most of the forms needed to accomplish a sale and included a list of items to be on the lookout for when selling a convenience store. And that the cost of all of this was less than $500.00 and could save him literally thousands of dollars. Basically, I had given him the road map he was looking for and was going to save him lots of money.

He then asked me where could he get this information for such a small price and why would I as business broker be willing to share this information with him when this is what I do for a living? I explained to him that I understood his feelings about brokers and knew that in my heart of hearts that I was never going to get his business and I knew that there are times when either I or another business broker could not be available to serve his needs, but he still had the situation of needing to sell his stores and I wanted him to have all of the tools he could possibly have when selling his stores. Even though it could have impacted my business it is still human nature to want to help your fellow man and woman. Giving is a part of us and is what we must do to grow.

I can happily say that the gentleman did take my advice and he did contact the company that I had suggested and in the first 60 days had received over 170 buyer inquiries and is now entertaining offers with a closing pending on one of his convenience stores.

So if you feel the same as my friend who could not utter the word broker without leaving a bad taste in his mouth, but yet want to save the many thousands of dollars he is, feel free to contact me at  and I will gladly share with you the same information that I did with my friend who is now in the process of putting buyers into the underperforming and cash draining stores that he once operated.

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.

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?

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.

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.

One of the neat things about the work I do is that I get to travel around the country a lot meeting with clients getting to talk about business and particularly convenience stores since that I was do. Help people value and sell their convenience stores. So since I get to travel a lot that means I am in a lot of convenience stores. Partially, because of the traveling and partially, because of the fact I want to see the convenience stores of my clients. And I am always looking for the unusual and unique things about a store.

For example, about 6 weeks ago I was in Las Vegas, NV and there was a store across the street from a major branded store and it was an independent owned store and not a new store probably about 2,200 square feet on a corner lot with a bunch of posters on the outside windows, about a ½ of a mile off of the strip that I went into too.

The store was busy and you could tell that it catered to mostly locals by the mix of the people in the store and type of vehicles in the parking lot. As soon as I walked in I thought this place is a good store. Although the store wasn’t laid out in a neat and orderly manner with a square floor plan as to the shape of the building, instead it was sort of diagonal, but it was loaded with pertinent inventory suited for the local customers. Very well stocked, which gave the customer a compelling feeling about wanting to buy something, which I did. To validate my point one of the people who I was with at the time who is also one of our brokers in the Las Vegas office all of a sudden said. Man, this is one good store.

Now, this guy used to be in the convenience store business too and he was thinking the same thing I was. We both had the same opinion in a matter of 5 minutes of how the store was well stocked and laid out in such a way that it seemed to reach out and make you want to buy more stuff. I am embarrassed to tell anyone how much stuff we bought and all we went in there for was to use the bathroom (which was clean by the way, but a really small one) and grab a soda, but a well stocked store without big aisles, compelling signage works.

Now, that story has nothing to do with the $20.00 pickpocket, but for anyone who may be reading this I thought they may like to hear about what turns on people who spends a lot of time in convenience stores. No, as for the pickpocket.

Again I like to look for the unusual in a convenience store and this one particular store always blows me away. I was back home in Southwest Florida (Ft Myers Beach to be exact) and went to my local 7-11 to get some gas & beer. Yes, I knew exactly what I wanted and it was a destination not a casual drop by the store thing. Got the gas and started inside to the store. And here again they had writing all over the front windows and doors of the store in colored marker. It said something about lottery and cookies I think.

Paying half attention to the writing on the windows I proceeded into the store to get my beer and go on my merry way home. As I approached the counter there was one guy working at that counter. Probably in his early or mid thirties (but who knows. At my age everybody looks young) in his red 7-11 shirt. I placed the beer on the counter and before I could say or do anything he says. You want to buy a $20.00 lottery ticket? I said is that what the front window of the store is promoting a $20.00 lottery ticket? He said yes would you like to buy one, because the State of Florida only does this type of promotion once a year. And then he proceeded to pull out a sheet of paper that showed the number of odds of you winning a $1MIL and all of the other possible prize amounts.

First let me share something with you. I don’t buy lottery tickets. I bet you I haven’t bought 25 of them in my lifetime, because I don’t’ believe in them so I am not an easy target. And when I did buy a lottery ticket is was when the prize money was some humongous amount of money in the millions so I found it intriguing that this guy was selling $20.00 lottery tickets and yes after his excellent presentation I bought one. He must have known that I had just left the ATM machine and had a pocket full of $20.00 bills or something.

But here is the part of the story I can’t understand and will welcome any input I can get on this issue. Why was this guy who is not a young kid, working an hourly job trying to sell me a lottery ticket, which probably at best had a 5% gross profit margin? Did the manager of the store threaten him and the other employees to do this? I know that isn’t true, because I know who the manager of the store is and she is a very nice person. This guy really wanted to sell me and he was sincere about his presentation. Why don’t I run into more people like this? Is suggested selling and one of higher ticket items a lost art and nobody wants to practice it anymore? I need help on this one and I hope that others will be able to share with me some of their stories as to how they have experienced some of the same great selling and service techniques that I have.

Happy shopping at the convenience store and be on the lookout for the suggestive sales clerk. They may just get your $20.00 bill.

 PS: If I do win the lottery it will be published with the title. “The last article” Until then as we always say. Don’t quit your day job.