BizQuest's Business for Sale Blog

Buying a Business - The Positive Impact

This week, I want to tell you an incredible story of entrepreneurship involving the Washburn family of Talihina, Oklahoma. It is a beacon of success for anyone who is thinking about buying a business.

We received the following letter last month from Tim Washburn. It is one of the most heartfelt notes we have ever read.

“I just wanted you to know you helped save my family's bacon. You may not remember me but I purchased your book "How to Buy a Good Business at a Great Price."  My wife and I have a totally disabled child and therefore Mary couldn't go out and get just any job.  We were not making ends meet and it looked like we were going to have to make some very dismal choices for our family of seven. I told her to give me a month and if I couldn't find anything for her to do at home to make money, then we could look at these less-than-desirable choices.

I read your book from cover to cover in three days and followed the procedures.  In a month and a half we bought an internet coffee business. Mary has been working it and couldn't be happier.  We have the extra income that our family needed and it has lifted her self-esteem immeasurably.

I owe you a huge debt of gratitude because your book gave us an avenue that kept our family together by providing us with an additional resource for income that kept the bacon coming in.

Your book, Richard, really works and I was desperate.  I know that if I had to again buy a business that I could (it was my first attempt at a business transaction and I don't have a business mind).  I simply followed the clearly laid-out procedures and got a business and paid 25% under the asking price.

I hope you read this and remember me and I hope this makes your day.”

Tim Washburn - Coffee, Tea & Spice - Talihina, OK – www.coffeecoffee.com 

My Thoughts:

I know many of our newsletter readers have never owned a business before. So, after having purchased ten of them myself, let me share my overriding business philosophy and a strategy that has made me a lot of money and will serve you well - I promise.

If you make it your company’s mission to really help the people who walk through your doors, then I guarantee that the profits will follow. One of the greatest benefits to owning your own business is the impact you can have on the lives of other people including family, employees, clients, and suppliers.

Customers can easily sense your sincerity and nearly everyone wants to do business with a company that truly cares. This philosophy goes beyond just plain vanilla customer service. It means that you go above and beyond to make certain that your customers love doing business with you. If you can instill that feeling into them, you can’t stop them from buying from you and you will crush the competition.

Tim’s letter proves two things: First, if you have the attitude that you NEED to buy a business and not that you just WANT to buy one, then you are going to accomplish your goals. All too often, people spend far too much time in the business-looking mode, but they’re not in the business-buying mode. They spend all their time searching listings but never get any results. You have to have a roadmap and you have to get out there and meet sellers.

Second, although we receive a constant flow of letters from people that our materials have helped, the impact of our program on the Washburn family validates everything that we do. It goes way beyond the profit – there is nothing more empowering than being able to significantly and there is nothing more empowering that to significantly and positively impact someone’s life.

Take a moment and visit Tim and Mary’s website: www.coffeecoffee.com. They have some incredible tea and coffee products – treat yourself – you deserve it! Or send someone a small gift. I ordered some of their products and they are terrific.

Why Would Anyone Sell a Good Business?

This question was posed to me recently by a radio show host. It was interesting because he couldn’t get his arms around the idea that anyone would ever sell a good business. It’s probably why he will never own one.

Kidding aside, it is a valid question. There are lots of reasons. Personally, I like the morbid ones: death, divorce, health issues, and not because I wish anyone harm. Rather, I think those are better motivators to get a deal done.

The one answer sellers give which many people have difficult with is “other business interests”. This reply naturally begs the same question that the radio show host asked me.
It is entirely possible, and common, that some people just get bored with their businesses.

Haven’t you ever been bored with your job? Perhaps a better question would be: “Have you ever had a job you loved?”

I have found that seller’s boredom is usually a result of them putting the business on cruise control for too long. They have lost their passion. They no longer look at their businesses and try to find ways to get bigger, better and faster everyday.

It is certainly a situation that a buyer can use to their advantage.

While you certainly want to dig in to the seller’s reasons for selling, don’t over-analyze the answer. It is far more important for you to focus upon whether or not there is a compelling reason for the sale that could impact the business after you buy it.

Specifically, are there any looming threats such as: pending legislation that could alter the business or, one large customer who will no longer be buying? Is a major competitor moving into the area, or local demographics that can alter the business significantly?

Of course there are many other possible scenarios which you need to investigate. Or, it may simply be the time has come to sell a business.

Skepticism, I believe, is one of the two most important characteristics that a good business buyer possesses. Use it effectively and not to paralyze you from buying a business, but rather to force you to conduct a flawless investigation and analysis.

The other characteristic is perseverance. Navigating your way through the business-buying process will have its ups and downs. It takes time and above all, it takes “know-how”. However, I can promise you that once you get to the finish line, and you own a good business that you can grow, all the nonsense you may have dealt with along the way will be a distant memory.

Buying a Business with a Partner – A Marriage Made in Heaven (or Hell)

I receive a surprising number of emails from prospective business buyers who are thinking about going into a venture with a partner. Usually, it’s a family member, friend or business acquaintance. What I find astonishing is that most inquiries relate to whether or not there needs to be a formalized agreement between the parties. After all most note, the partners have known each other for many years, they get along great, and trust one another. That’s all wonderful but the answer is an overwhelming, unconditional and categorical "yes" – you absolutely must have a formalized agreement.

To give you a personal example, my brother and I owned a large company together. I would trust my brother with my life in addition to him being a tremendous business confidante. Our partnership was perfect but, if heaven forbid something happened to him or me, the last thing either of us wanted was to suddenly have the other’s spouse as our partner (even though we love our sisters-in-law). For this, and numerous other reasons, it just makes sense to have everything documented.

It does not have to be a 50-page shareholder/partnership agreement but it must clearly spell out the necessary fundamentals. Everyone goes into a partnership all glassy-eyed and hopeful. Dreams are shared. You are convinced you’ll conquer the world together. Unfortunately, situations change. Like my first boss and late uncle once told me: "you never know a woman until you marry her, and you never know a man until you work with him".

While you will want to have an attorney compile any agreement, a few of the issues to consider include:

• Definition of ownership
• Dealing with disputes
• Mechanisms to dissolve the partnership
• Procedures to follow and a pre-determined formula to value the business in the event of a buyout by one party
• Voting rights should one partner own the majority of shares (some issues such as dilution, binding the company, selling additional shares may need unanimous consent)
• Procedure to follow in the event one partner dies, becomes incapacitated and unable to contribute to the business for an extensive period of time

Above all, the agreement must be fair to both parties.

I have had many partners in the numerous companies I have owned over the years. Most were great, and only a few were disastrous. Personally, I am a huge believer in having a partner. If the combination is right you can really divide and conquer!

If you are going to buy a business with a partner here are a few things to consider:

• Partnerships work best when each party brings a distinct set of skills to the equation. In other words, you should each have your own area of expertise and not simply a duplication of skills.
• Just because you get along with the other party is not enough reason to go into business together.\
• You need to formulate a list of fundamentals in advance that you both agree any business you consider purchasing must have in place. If not, each partner will find a reason not to buy every business you review.
• Understand that your personal relationship with the partner will never be the same once you’re in business together. It may get better. It may get worse. Just remember what my uncle said. In my opinion, it is never worth it to jeopardize a friendship over a business but that’s not always possible. Be mindful of it and try as best as you can to keep business and personal issues separate.
• You need to share the philosophy that the business comes first before individual personal gain. If you do right by the business, the personal rewards will always follow.

Business partnerships are a lot more difficult than marriage because there’s money at stake from day one and it can really influence people. Just like a marriage, a business partnership takes work; you must have full faith in the other party, and initiatives you undertake should be for mutual benefit. Most importantly like a marriage, if there are "issues", you need to communicate no matter how difficult it may be. You cannot sweep problems under the rug hoping they’ll go away. Just like in a marriage, problems left unresolved or ones that are too big, will cause the business to breakdown and will likely not be salvageable.

How 33 People Are Buying a $20 Million Business

I received a general email a couple months back from a man named Ron Baker with a simple message: "please call me". Since I've always made it a point to speak with or meet with anybody who contacts me, I called him. He told me about a workshop he was putting on for prospective business buyers in Fremont, California and he wanted to include our materials in the curriculum. I was struck by Ron's sincere agenda to really help people. He ordered a number of copies and right after the two-day workshop he told me the response was overwhelming. After reading some of the attendee comments, I had to agree.

Ron took it one step further. He located a phenomenal business generating over $5,000,000 in Net Income and assembled the entire seminar group into an investment partnership and they're now in the final stages of closing the deal. The wild thing is that this entire process took less than one month. The lesson here is that the only thing standing between you and the ideal business is having the right information at your disposal.

Take a minute and read the complete story about Ron's group it's REALLY inspiring. While visiting the website, you may want to inquire about the upcoming workshop on June 30th - you never know what can happen after attending.

Another Reminder Why It's Good To Be The Boss

I've been in my own business for 17 years now and have never, ever regretted my decision to go on  my own. Two weeks ago, I had another reminder why it's good to be the boss. My five-year old son had a medical emergency. The diagnosis, while not life-threatening, is nevertheless a chronic condition that will certainly impact little Jake. As a family, we're strong and we will deal with it effectively. I'm convinced it will make us better in the long run. Jake will learn to adapt - kids just do.

So what does this have to do with being in your own business?

When I was at the hospital, and in the emergency ward, two sets of parents were there with their children. The mother of one child was telling her husband how she had to get back to the office to finish a file. She said her boss was "pissed" at her for leaving altogether.  I got the sense she was an attorney's assistant or something. I absolutely could not believe the pressure she felt as an employee given the situation.

Next, I encountered a gentleman "negotiating" with one of the nurses who was trying to schedule an EEG for his son. He was giving her some dates that were "good" for him over the next week. He also mentioned that he "just can't take off when he wants".

I must admit, I was a bit perplexed by these two parents. I also felt terrible for them. At first I questioned their priorities, and still do. Then I realized how much they were under the microscope of their boss, and how inflexible the life of an employee is - awful, simply awful. I would bet that their bosses are nowhere near as bad as they portrayed them (although 'boss' spelled backwards is Double S.O.B.) however; they still had this fear of doing something wrong and jeopardizing their job.

On the other hand, outside of my son's health, I did not have a care in the world. I proceeeded to cancel all my appointments for the next couple weeks, told my staff that I may, or may not be in, to only contact me in emergencies, and I have been able to dedicate 100% of my time to my son and family. I've been spending my days researching this condition, meeting with specialists and exploring the options available.

This situation has provoked some deep thinking on my part. In the past few days as I've reflected upon the recent events, it has become so clear to me how lucky I am, and how many benefits there are to self-employement, besides the financial rewards.

You could never do this as an employee unless you take off vacation time that you earned through your hard work. That's why it's good to buy a business and be your own boss. You can structure the business to work for you, and not vice versa. You control your time, your future, your destiny. Nobody else is pulling your strings. These are just some added benefits that business ownership can provide.

I hope you never have to go through what my family is faced with, but if you truly want flexibility, job security and options in your professional life, only you can provide it to yourself! It's time to fire your boss!

NEWS ALERT: The Greatest Technological Advance Now Available

Email has changed the world and how we communicate. It is without question, a tremendous tool. In the course of a typical day, I receive and send over 100 emails. I am not sure if this is a good thing. I have really found that this new mode of communication has two awful drawbacks: First, email has robbed all of us of the time we need to just daydream. This is especially important when either running or buying a business. We need to time to just think about "stuff". Some of the greatest initiatives I've implemented in my businesses have surfaced when I was able to devote undisturbed time to reflect on what the business should do or become. Always being "connected" by email and mobile phone prevents this random thinking.

Second, we have set aside what I believe is the greatest mode of communication outside of in person conversations: the telephone. It's amazing to me that people just don't talk. Emails are fired off in rapid- fire succession. The problem is, you cannot rescind the written word. The good news is that people are now far more accessible at their offices than ever before, because people don't call.  This is critically important when it comes to buying a business and then operating one. If you have any critical issues to discuss with the other side, or with prospective clients; call them - don't email. You may think I'm crazy but a good part of my publishing business has grown simply because I don't email prospective affiliates of joint venture partners. I call them and that immediately establishes a relationship at an entirely different level.

All of this is very important when it comes to buying a business. You will run into roadblocks with sellers. Firing off emails, and especially if you use them to vent frustration, is the wrong approach. Call them, or meet with them. Also, this "new" way of communicating works with business brokers. They are slammed with email inquiries. If you want to separate yourself, pick up the phone and inquire about their listings.

Email cell phones, PDAs, Blackeberrys, are all great, but they are no substitute for the human voice and personal touch. When all is said and done, just remember that Alexander Graham Bell's invention in 1876 is the greatest technological advance of all.

 

The Business Buying Business is Booming

Each year I am amazed, but not at all surprised, how the entire category of entrepreneurship continues to grow. I was however stunned to learn that a number of business brokers reported a less than stellar year in 2006. In fact, most people I have spoken with in the business brokerage world have told me that sales were down or flat, and that deal size has been down. I think they're missing the boat. People are clearly going far beyond the world of business brokerage to launch their entrepreneurial career because industry wide, entrepreneurship is on a tear!

I know in my publishing business, things are booming. I still cannot believe how many "how to" guides we sell each month. We first launched our guides online in April 2001. We sold $419.00 the first month. Now we do more than that overnight while I'm sleeping. I see the traffic patterns each day/week/month and the year over year numbers are very encouraging for entrepreneurs. More people are getting into their own businesses which mean more resources become available and each feeds the other.

This upsurge also holds true for business start-ups. According to a recent article by Phaedra Hise of Fortune Small Business, "We are in the midst of the largest entrepreneurial surge this country has ever seen. According to Small Business Administration projections, nearly 672,000 new companies with employees were created in 2005. That is the biggest business birthrate in U.S. history: 30,000 more startups than in 2004, and 12% more than at the height of dot-com hysteria in 1996."

Read the full article at: http://money.cnn.com/2007/01/22/magazines/fsb/entrepreneurship.boom.fsb/index.htm?postversion=2007012312

Anyone who thinks about going into their own business usually considers either a start-up, a franchise or buying an existing business. I'll cover why I prefer buying an ongoing business in other posts but the point I want to really make is that entrepreneurship is a phenomenally active space right now, and it is not going to stop.

The downside of course is that the market is constantly being flooded with new buyers. Unlike real property where this condition would push up valuations, overall business prices and multiples have remained very steady for many years. That's the good news. The bad news is that a good business hits the market and can be under contract in days so your biggest challenge is the competition from other buyers. you need to act fact and pounce on an opportunity. I have learned two very important things about opportunity:

First, it arrives in a second and is gone in a flash. Second, opportunities are not missed, somebody exploits them. So if you let it pass you by, someone else will benefit. With the new year upon us, if you want to get into business, then get aggressive. The last thing you want is let the opportunities pass you by in 2007 and still be thinking about the same thing next year.

Perseverance and What Else??

In my first post on this blog, I talked about the three traits common to every successful entrepreneur I have met. The first characteristic was perseverance. The second is that all great entrepreneurs are smart enough to know they don’t know it all.

Three entrepreneurs whom I know well and who have a combined net worth of over $100 million really stand out. As I got to know them better over the past years, I was always amazed how they were the first to admit when they did not know something. Whenever they evaluated a situation, or potential acquisition, they immediately did two things: One, they gained access to, and devoured as much information as humanly possible on the subject. They searched online, subscribed to journals, and purchased books on the topic. Then, their inclination was to find out who the best person is in the industry whom they could hire to provide consulting work to them.

When I first started out in business in 1990, I must admit, I did not hire top notch people. Part of the reason was I couldn’t afford them, but in looking back, I think I may have been just a bit insecure to have an employee who knew more than I did. I hate to sound egotistical, but as I became more successful, and gained more confidence in my own ability, it was very easy to stand on the sidelines and let the specialists do their job. There’s no doubt that my businesses grew meteorically after I began to surround myself with people that were bigger, better, faster, and smarter than me (the last one wasn’t too hard).

No matter what business you ultimately get into, make it a point from day one to be influenced by the best people possible. Also, if you’re going to attack a new project, develop a new line of business, consider expansion, or look at doing anything where you’re less than an expert, then get informed. There’s no shame in recognizing what you don’t know. Actually, the opposite holds true – ignorance is a curse. In fact, the greatest strength you can have in business is knowing your weaknesses.

OK, so how does this relate to buying a business? It’s simple: get informed, hire the most experienced professionals possible. Don’t look to save a few bucks hiring your cousin’s brother the patent attorney to handle the transaction – that’s not their expertise. Engage an accountant who has analyzed and conducted due diligence on similar type businesses. If you have a sprained ankle, you don’t visit the dentist. Lawyers and CPAs have their own specialties. I see this everyday, especially with foreign buyers; they let their immigration attorney handle the business deal – dumb, dumb, dumb!

If this entire process is new to you, then get hold of the right information. Don’t fool yourself – there’s a lot involved in buying or selling a business.

Hello World! and Inc. 500

Welcome to the BizQuest Blog! This is the first ever posting in what I hope will eventually prove to be one of the key features of BizQuest.com. Richard and I have a lot of ideas we've been itching to start blogging about - so we are excited to finally begin! Also, I am going to be inviting some other guest bloggers to join in the near future so stay tuned for that...

Inc. 500 list. I found the story of the man behind the #1 company on the list to be very compelling - but then again, I'll listen to anyone who has grown their business 5,629% over the last 3 years! Tim Litle is a classic serial entrepreneur, who has already sold several businesses. He sold his last business in 1995 for $80 million. He took a few years off to enjoy himself (and, more importantly, to wait for his non-compete to expire) then started another business in 2001 doing the exact same thing as the previous one. And now it is doing $35 million in revenue, and is #1 on the Inc. 500. Wow.

He is clearly a man who enjoys the process of building a business. I think this is a huge key to success for any aspiring entrepreneur. You will be much more successful if you enjoy what you are doing on a daily basis, and I don't just mean the "personal satisfaction" kind of success - I mean your business is much more likely to be financially successful if you truly enjoy doing it. This doesn’t mean you have to build a business around one of your hobbies (does the world need another microbrewery?) but if you don’t enjoy the process of building a company you might be better off working for someone who already has.

The other big key to success I took away from Tim Litle is that the most successful entrepreneur will be both an idea-person/visionary and an operations guru. He clearly was the former, having introduced both Visa/MasterCard and the USPS to some of their biggest innovations of the last few decades. But he also stressed the operations side of his business, and indeed many of his innovations had to do with operational improvements. Truly successful businesses combine big ideas with rock solid operations, and the entrepreneur who is capable of excelling in both areas will meet with much success (think Bill Gates, Jeff Bezos, Steve Jobs, etc.).

To make the Inc. 500 is an amazing accomplishment, and to be #1 on the list is something to truly be admired. The good news is they publish a new list every year. Which one of you is going to make the list 5 years from now? Or maybe it will be BizQuest.com – now that would be very cool indeed…