Ruth and Jim … A Christmas Story

Santa Delivers on a Rich-Biz Promise … 7 Business Gifts = Business Ownership

Ruth and Jim were diligent over the years with their investment discipline. Both had max’d out their 401Ks and provided higher education funding for both of their kids. Additionally, they’ve prospered from their investments in common stocks.

Now Ruth and Jim are contemplating a major life-changing event … leaving the corporate world where each has served for over 20 years … with no intent to retire. Given their enviable financial position, they are prepared to liquidate their stock market holdings and seek opportunities to own their own business.

Ruth and Jim’s neighbor, Phil, is a successful entrepreneur, having purchased a “going concern” some years ago. They decided to look to him for guidance. Phil’s recommendation was a repeat of his own … to seek both advice and professionally vetted businesses for sale by Rich-Biz Brokers & Advisors, LLC (R-B). Ruth and Jim agreed to schedule a meeting with R-B and promised Phil to let him know how it went.

Here’s a rundown on how Ruth and Jim started the process that added to their Holiday Cheer!

Initial Consultation With R-B … A Report to Phil

Ruth and Jim met with the two owners of R-B, Wayne Bullis and Chuck Pearson. They reported a meeting that focused on their needs and felt no pressure to immediately consider a business to buy.

Wayne and Chuck started with a recount of the advantages and disadvantages of buying a business … with a sensitivity to Ruth and Jim being prospective first-time entrepreneurs. They emphasized that buying an existing business means becoming an “instant entrepreneur” without the same financial and emotional risks of launching a new enterprise. Those benefits could include:

  • Recognized brand identity
  • Established relationships with both customers and suppliers
  • Easier to obtain financing given a good history of profitability
  • Immediate cash flow from current operations
  • A building or office space
  • Inventory and equipment
  • Customer base
  • Vendor and supplier base
  • Existing employees who can share their knowledge and expertise

In contrast, Wayne and Chuck also cautioned that there can be the potential for some post-purchase surprises,  such as:

  • The cost may be higher than starting from scratch as often you are buying “goodwill”.
  • Existing problems can be hidden until after the sale, even with strong due diligence.
  • Inventories may be obsolete due to their age.
  • Equipment may be faulty or outdated.
  • The learning curve may be steeper than expected.

With the above as a frame-of-reference, Wayne and Chuck presented an outline of self-examination for Ruth and Jim to ensure they seek a business that dove-tails with their interests, abilities, financial wherewithal, professional goals and family considerations. An eleven-point outline helped them formulate their decision matrix.

  • Why is the business for sale?
  • Why would you want to buy this business?
  • Can you afford to buy the business, given your financial and family constraints?
  • Will the owner consider financing all or part of the purchase price?
  • Do you have adequate third-party financing resources to consummate the purchase?
  • Would starting a similar business be a realistic alternative?
  • Do you have the interest, experience and physical energy to make this business successful?
  • What does the competitive landscape look like?
  • Is the business “trendy” or does it exhibit a long-term outlook to endure?
  • Is it a “life-style” business that becomes your job, or one with the potential to build as an asset?
  • Will you buy and operate the business on your own or with a partner(s)?

Both Ruth and Jim were impressed with this initial session that helped synthesize their thinking about a particular business or generalized (often emotional) attraction to a certain class of businesses. Wayne and Chuck were engaged to go on the hunt for likely prospects that fit Ruth’s and Jim’s preferred profile.

The couple were briefed that the R-B search will be based on solid answers to questions regarding the six major drivers of business value.

  1. Company Organization
  2. Books and Records
  3. Systems
  4. Policies and Procedures
  5. Personnel and Clientele
  6. Marketing and Sales
Santa’s Delivery is Now in Process

Now it’s mid-December, both Ruth and Jim are pleasantly surprised by a special delivery this Holiday Season. As they opened the package, they were delighted at the R-B due-diligence and recommendation of a business that was an ideal “fit” … one that will capitalize on Jim’s years as a successful sales executive and Ruth’s decades of experience in finance.

Additionally, the contents were fully in keeping with the R-B promise to ensure rock-hard assurances regarding the six major drivers of business value. This is evidence that the business operates with smoothness, accuracy, clarity, efficiency, quality and positive results.

Gift #1

Company Organization:  Guiding Principle … The more valuable the current owner(s) are to the company, the less valuable the company is to you, the prospective new proprietor. This company is not dependent on the presence of the current owners. The leadership structure, staff culture/personality and open communication channels among workers to each other and management are admirable.

Gift #2

Books and Records:  Financial records are complete, accurate and up-to-date. Likewise, personnel records are fully documented and compliant with federal, state and local employment requirements. Licensing and other legal issues are in-sync with industry, professional and legal regulations.

Gift #3

Systems – Repeatable, Efficient Processes in Place:  State-of-the-art systems are in place and implemented as management tools to run the business efficiently and profitably. Anticipate that the systems will:

  • Improve top-line performance
  • Meet customer expectations
  • Develop consistent results
  • Engage employees with guidance, direction and expected results
  • Reduce costs and improve profits
Gift #4

Policies and Procedures:  Appropriate personnel, supervisory and safety issues are proactively written, up-to-date, compliant policies and procedures for all the following, and available for staff review:

  • Human Resources
  • Operations
  • Marketing
  • Sales
  • Communications
Gift #5

Personnel and Clientele: There appears to be little or no concern about key employees leaving the company after your purchase. There is written documentation that supports a solid record of how employees are on-boarded, groomed for advancement and managed to motivate employee engagement … all of which offers comfort that there is likely to be continuity in staffing. Documentation includes:

  • Staffing procedures – acquisition through termination
  • Personnel development, training, career path development
  • Management nurturing, motivating and enhancing employee engagement
  • Supervision and evaluation by management to recognize strengths and improve performance
Gift #6

Marketing and Sales: Marketing support is in place to drive superior sales performance. There is a clear line between marketing and sales with the former in place to support business development efforts. Sales goals are backed by marketing as follows:

  • Stated marketing strategy
  • Written marketing plans for current and ensuing 2 years
  • Specific target outcomes for marketing campaigns
  • Evaluation of marketing efforts vs. sales results
Unexpected Gift #7

R-B believes there are opportunities to enhance revenue, streamline operations and improve the company’s bottom-line. As attractive as the above analysis is, there are opportunities for creative “tweaking” to further enhance the asset value of the business.

Merry Christmas and Happy New Year!

Ruth and Jim took some time to digest the R-B recommendation, ask some clarifying questions, plus visit the business for a visual and “gut-feel” impression of facilities, staff and “curb appeal”. Their decision was made. Their welcomed Christmas gifts will usher in an exciting New Year as business owners!

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