What Do Absentee-Owner Businesses and Unicorns Have in Common?

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unicornWe often hear from people who are interested in finding a business that won’t take much of their time – one that’s cheap to buy and provides a good return.

Something they can run as a sideline to their full-time job. The car wash is a common conception of the absentee-owner business.

It looks like a business you can set and forget. Just let it run and collect the money.

Well, finding that kind of business is about as likely as finding a unicorn walking down the street.

If we knew of one, we’d have already bought it ourselves, and we’d be the ones galloping off toward that imaginary rainbow!

If you do find a business that doesn’t require the owner’s constant attention – and we do sell those – it’s likely to be a longstanding business, which the owner has built over time.

He has managers and employees he knows and trusts, and he can look at the financial statements and easily identify and address trends before they become problems.

As a new owner, you wouldn’t automatically inherit the ease he enjoys.

To improve the odds of success, new owners should plan to spend a good portion of every week in the business. You need to learn your industry, your store or operation, your employees and your financials. You will want to build relationships with your customers.

How will you know if your car wash machinery is working right, your property is being maintained and your manager is depositing all the day’s quarters each night? It takes some footwork and close attention to look after all the details of the business.

We had a client who bought a few coin-operated car washes several years ago while holding down a full-time job. It wasn’t long before he learned his managers were stealing from him and failing to maintain the equipment. He quit his job to rescue the businesses but ended up selling the car washes eventually.

Don’t get us wrong; car washes can be great businesses. We have another client who is doing very well with car washes. He has taken some time to build them up and put strong managers in place. If they’re located in high-traffic areas, maintained properly and managed with integrity, car washes can return a solid return year after year.

So is the dream of an absentee-owner business possible? With several years’ investment, you may be able to achieve it. Otherwise, you’re better off leaving the unicorn on the storybook page.

If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!

Selling Your Business? Why an Exclusive Engagement Agreement Is Essential

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agreementAre you looking to sell your business but hesitating to sign an agreement with a business broker?

Thinking about sharing your business opportunity with multiple brokers?

If so, you may want to hear our perspective about the value of an exclusive engagement agreement.

You want your broker to work hard for you.
If you try to sell your business through multiple brokers, how much effort can you expect?

Why would a broker put great effort and investment into preparing a marketing package and expending resources on your deal when he stands a good chance of losing it to another broker?

You want to protect your confidentiality.
Asking multiple brokers to work on your sale almost guarantees a breach of information about the particulars of your business.

Because there’s no commitment on the part of the seller, the brokers may become more flexible about the information they’re willing to share. The brokers will be talking to the same set of potential buyers, and they may be more interested in satisfying the needs of the buyer rather than the seller.

You’d like to maintain the value of your business.
Having multiple brokers working on your behalf with the same buyers could signify some desperation or lack of motivation. In either case, the buyers will not perceive it positively and will most likely show a reluctance to engage.

If someone saw the same business on the web from three different advisors or received direct calls from them, they would be really curious about the circumstances and would probably approach the opportunity with much more skepticism.

You want a broker with experience.
Ask yourself why a broker may be willing to work without an exclusive agreement. Could it be inexperience, a poor record or desperation for business?

An exclusive engagement agreement protects both the buyer and the seller. It sets expectations and establishes a mutually beneficial relationship. Our agreements typically cover one year because the average time to sell a business is around nine months.

Your broker will invest a lot in helping you sell – from assisting you with positioning/marketing your business and finding potential buyers, to qualifying them, helping you negotiate the deal, and working with bankers, accountants and attorneys to get the deal to closing.

To ensure you’ve chosen the right broker before signing an exclusive agreement:

  • Do your research. Look at the broker’s current listings, past activity and testimonials from happy buyers and sellers. Ask for references from accountants, lawyers and other professionals with whom they’ve worked.
  • Agree on the services your broker will provide and clarify your expectations about regular progress reports – by email, phone or in-person meetings.
  • Be patient. But if you’re not seeing the effort you expect, speak up early! Open and honest communication is always best.

If you haven’t met a single qualified buyer after a few months, you’ll want to regroup. Reassess the pricing, look at feedback from potential buyers and discuss adjustments with your broker. When you’ve established a trusting, clear agreement at the start, these conversations should be comfortable for both you and your broker.

If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!