Apex Success Stories #3: Just Do the Work

ImplementSometimes we see that new owners do better than the former ones not because they have any more skills, but simply because they do work that the former owners refused to do. This isn’t necessarily groundbreaking, difficult, uphill work.

Often it’s the simplest of things.

One of our clients provided seeds to farmers and growers. However, he wouldn’t ever fully fulfill the orders. Someone might order 15,000 seeds and he would send 5,000. Customers enjoyed dealing with him, as he was friendly, but he never took the business seriously and just ran it himself. Even so, he managed to take in $1.8M in top line revenue each year, keeping $300,000 of profit for himself. Within one year, the new owner took the business to $6.3M in top line revenue, with $840,000 of net profit.

The big difference? Total fulfillment of orders, instead of just partial fulfillment.

In addition to owners not doing basic tasks, we often see them prey to fatigue.

One of our brokers was speaking with an owner of a group home that was running at about 70% capacity. As we looked at the overall numbers, we saw that getting closer to 100% capacity would significantly increase his net profit. His response? “I’m tired of babysitting.” In this case, the fatigue would cost the owner more, as not running it at capacity meant the business was undervalued. Conversely, this would spell a good opportunity for a new owner: bring it up to capacity — the infrastructure already exists — and there’s some found money.

Sometimes doing the work isn’t as simple as fully fulfilling orders or running your facility to capacity.

Sometimes it involves paperwork that the previous owner didn’t want to do.

One of our clients found this out when he bought a business that provided supplies to independent convenience stores (things like cups, straws, etc). The previous owner didn’t take the rebates from the big soda manufacturers. As you might guess, those companies aren’t just willing to hand out money easily, but if you do take the time to document that you sold at least X amount of their fizzy drink by filling out the paperwork they ask for, you’re eligible for some rebates.

How much, you might ask? Well, the client paid $800k for the company, but now, only two years later, can sell it for $1.5M, having changed almost nothing in the business apart from doing the work that the previous owner was unwilling to do or delegate.

While of course there are “failures” by previous owners, the reason we see these as “successes” is because you can see how often that line between good and great hinges on little things like filling out rebate paperwork or being willing to “babysit” so that you can make a final push to get a great valuation for your business. We’d love to take a look at your business and see where you might have some opportunities to find money as well as share resources to help you capture it.

Apex Success Stories #2: Process and Motivation Always Win

Process and MotivationThis is an ongoing series of stories from our own clients about their experiences selling with us.  

We recently were on both the buying and selling side of a local dog-walking business. The business had a manager in place, as the owner lived out of state. The buyers were local, a couple who were looking for a “starter business” in which the wife would take over a managing role while the husband kept his job.

What made this transaction a win/win/win was the motivation and helpfulness of the buyer, and the process-orientation and seriousness of the seller. Put those together with two brokers from the APEX team, and things work out well, and quickly.

Funding

We’ve mentioned the importance of developing a relationship with a banker, and you’ll be happy to know, we take our own advice!

The buyer went to one of our bankers to get an SBA loan, as they didn’t want to use up their cash on hand. Our banker told them it would be more expensive to get an SBA loan, and it was smaller than the amounts they usually would fund, but they would do it if necessary because they’ve done so many deals with us and know that the diligence would be in place. But the banker said it would be a much better option for a number of reasons to simply get a home equity loan for the amount they needed to finance the purchase of the business, which was the option they ended up taking.

Diligence

Once an offer to purchase was agreed to, both parties started the diligence process.

The seller, though out of state, was consistently on the ball and helpful. The buyer had a demanding day job, and hence could only usually get to the requests on the weekends, but we came to expect emails on Mondays with all the questions we needed answered. The buyers had looked at a number of businesses prior to this one that just weren’t good fits for one reason or another. When they saw that a business was already being run by an absentee owner in concert with a manager, they saw a great opportunity to use all the manuals and processes that made such an arrangement possible, and leverage it to grow the business with local ownership that was also involved in operations.

Closing and Transition

The buyers and seller didn’t meet until the day of closing. The seller scheduled five days of in-person, intense training to help the buyers get started, and they have a clear transition plan for future questions. Every part of the sale, from the listing, to the offer, to the diligence, to the closing, and even to the transition, went “according to plan,” in great part due to a great match of buyer and seller. As brokers, we don’t create these solid, well-operated businesses, but we do know how to find the right people to buy them and take them over. This was one of those times when everyone checked their egos at the door, realizing they had a “job” to do in order to make this transaction happen, and then they did it.

We sell businesses of all sizes, from a local dog walking business to national construction firms.  Whether you’re looking to buy or sell, we are certain we can help!

Apex Success Stories #1: The Long Game

the long gameThis is the first in a new series for the blog: stories from our own clients about their experiences selling with us. We hope you enjoy them!

Roger was the third generation owner of a contracting business that had been operating since 1954.  He entered management of the company in 1997.

In 2006 he took over as owner, moving it from a home-based operation with three employees to an office building which (at the time of the sale last month) housed 30 employees.

Why sell?

“I grew up in this business, turning wrenches,” Roger shared.  “It’s all I’ve ever known, and I’m ready to try something new.”  

But more importantly, Roger had surrounded himself with good business advisors over the years, who all encouraged him to have an exit plan, even if he didn’t plan to use it immediately.  

He also remembered the pain of the mid-2000s, when the industry was hit hard and the company had to lay off staff and considered closing the doors.  

As they climbed out of that challenging time he made sure the books and records were clean and spotless (no personal expenses within the business) so that if an opportunity came to sell he would be able to explore it.

The opportunity came with some encouragement in the form of Apex’s Valerie Vaughn.  She’d been calling him twice a year for the past four years to check in and see what his state of mind was.  

When her most recent call came in, Roger didn’t put her off for another six months, and in the wake of the company’s best year ever, thought it was worth a deeper conversation or two.  

That started parallel discussions with his accountants and financial planners. Before too long, the decision was made to put the business on the market.

Because Roger had worked hard to put systems into place, when he asked his staff to do an extensive inventory of equipment (including serial numbers), there wasn’t too much fuss.

Valerie herself noted how attractive it was to buyers that, when the business was listed, it had the financials from the previous month…despite the fact that the month had only ended 24 hours before.  

She also noted how responsive Roger was to requests for information and paperwork – often things were turned around in a day or less. This is transparency and speed that buyers (and we as brokers!) really appreciate – and chase!

Sale

“We got two offers within 48 hours; I was shocked,” said Roger, with a bit of laughter in his voice.  

At Apex, we certainly can’t promise those results to all of our clients, but we can say that when a business is solid, we aren’t ever that surprised when buyers move quickly.  

But moving quickly wasn’t Roger’s primary aim. He was ready to walk away if the buyer wasn’t right.

“I was interviewing (the eventual buyer) as much as he was interviewing me.  I wanted to make sure he was the right guy to take care of my people.”

The buyer came from a business development background and, apart from being a good cultural fit for the company, had the long-term vision to complement what Roger had accomplished so well over the years: good systems through an intimate on-the-ground working knowledge of the business.

Roger was originally tabbed to spend 30 days in the firm “as is” and then move to 10-20 hours a week for another 30 days, allowing him to be completely out within 60 days. But the early working relationship has been even better than he expected, and it looks like he may be sitting on an Advisory Board for the company in a paid capacity.

What’s next

When we asked Roger if he’d treated himself, he was a bit coy.  

“Look, I’ve been able to show up to work at 8 a.m. instead of 6:15 a.m. for the last couple weeks.  And no ‘business owner stress.’ That’s awesome.”

While the reward for himself may be in the future, he did buy his wife a new car as a way to enjoy the exit. He also hasn’t wasted any time getting into a new venture: a drone photography business with both his kids, who have full-time jobs of their own.

While it’s a side hustle for now, Roger sees a lot of potential in the industry and sees every possibility of building another business to sell.

While Roger had managed the purchase of the business from his father in 2006 without a broker, he said he wouldn’t even have considered doing that this time around.  More than anything, he was worried about confidentiality, as he had seen others in his industry over the years try to go to market on their own and shortly found themselves without employees, who panicked and got other jobs (which are almost always on offer) at other firms.  While we’re proud of the confidentiality we bring to all our transactions, it’s only one of the many advantages we bring to the table. Give us a call to see if it might be time to explore buying or selling a business yourself!