Small Business Success Doesn't Always Start Pretty
One Door Closes, One Door Opens....
In the Beginning........
I was asked by an attorney to talk to one of his clients about the options available to business owners who are considering the sale of their business. The attorney told me the business owner, we'll call him Jack, is in the "gathering information" stage.
I met Jack and his attorney for lunch today. One of the questions I always ask business owners is ......how did you get into this business? Jack's story was not that uncommon. He had been working for a big corporation and was tired of the travel, the possible requirement to move his family, the lack of controlling his destiny, etc. The same feelings that many people working in the corporate world have everyday...and...do nothing about it,
How to Buy a Business
Jack did do something about it....
It was 2006 and Jack started his process informally. He told his friends that he wanted to run his own show and if they had any small business ideas to please send them his way.
It wasn't long before a friend of Jack's came to Jack and said that a supplier of his was struggling and the business was a mess and he thought somebody needed to fix it. Jack had zero experience in the industry so he did some homework on the business and the industry and decided the business was in a good niche and had a surprisingly good history. Jack approached the owner without any idea what he would say.
It was apparent to Jack that the attitude and managerial style of the business owner was a problem. The current owner was a second generation owner who had not long ago become the new head honcho. Jack offered to buy the business. The owner had highly unreasonable price expectations but again Jack did his homework and eventually the owner agreed to sell Jack the business. Part of the deal was the owner was to stick around for 60 days to show Jack the ropes and help with the transition and the 10 employees.
Within days of the purchase Jack had to pull the plug on the old owner even coming in for the transition period. Jack realized the industry was good and the employees were good but the owner was the problem. There were no operations manuals, procedures, checklists, nada, zip, zero.
Since Jack didn't know the business and the owner wasn't any help Jack had to manage employees who knew he didn't have a clue about what was going on in the business or why. Normally that's risky business but Jack, who has corporate experience as a trainer, made a brilliant decision. He decided to create a schedule and have every employee train him.
And as they were training him, Jack wrote up the procedures and systems for every facet of the business. He and the employees made changes and improvements on the fly. Jack trusted them and they came through.
Putting these systems into place has added substantial value to the business because there is less risk if employees leave since they have written procedures and system processes.
It was a brutal first few months but Jack made it thru. Since then Jack has nearly tripled the sales,even though the economic climate was poor, and he turned a money losing business into a very profitable business. Now Jack has the option to sell the business and realize something approaching a $1million pay day.
Not bad for a guy who decided working in the corporate world was a little too safe.