Podcast Episode 13 – Deciphering an Ad

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The first stop for people in their search is the popular business listing websites. Today, we break down the differences between a good blind ad and a not-so-good blind ad.

Book Club #27: The Barstool MBA, by Dan Maccarone and Bob Sullivan

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Barstool MBALet’s face it, a lot of business books are pretty boring and can be a lot shorter.  Part of why we have this book club series of articles is to steer you away from those (Good to Great, anyone?) and towards books that won’t feel like a college assignment and offer thoughtful reflections and sometimes, good advice.  The Barstool MBA: Why Running a Bar Beats Running to Business School is one of those books.  Co-authored by successful bar owner Dan Maccarone and best-selling author Bob Sullivan, this book is unconventional from the start: it’s only available in audio format.

A business-oriented title from the Audible Originals series, this 8.5 hour listen features both authors reading, as well as a “tip jar” section at the end of each chapter offering summary and a few “tips” to crystallize what you’ve just heard into ideas you might implement or try.

If you’ve ever worked in a bar, you’re going to enjoy some of the stories that are shared.  If you’ve never worked in a bar, you’re going to get a much better appreciation for all that goes into making your time at one enjoyable.

The book takes us from pre-opening, to opening, to closing and/or selling a bar.  While we follow one particular project of Maccarone’s, a NYC bar named Destination, the authors have correlating stories of other NYC bars to offer context to their lessons, as well as stories of other tech startups and exits to help you see the through line of their “earned at the bar” lessons running all the way to Silicon Valley.

So, here are a few bar snacks to get you interested in giving this book a listen:

Chapters 1 and 2 are very much about beginning with the end in mind.  While we may think of a bar as just a place to relax with some friends, the best ones are memorable to you, ones that you describe to others, as a place “you just have to go” to.  Those places have applied a forensic level of intentionality to what the bar will be and how customers will feel inside it, in other words, the customer journey.  This can include:

  • What will happen on slow nights?  Will there be live music, games, food promotions?  Each of those possibilities brings a different kind of crowd that may or may not mesh with what the bar is and stands for.
  • What sort of drinks are you serving?  If you’re trying to hawk independent beers, carrying any of the major brands can undermine your legitimacy.  If you’re serving high end cocktails, how competent are your bartenders with those drinks?  The bartenders themselves — are they the type that not only get you regulars but have those regulars tell their friends?

Chapters 5-15 are the heart of the book and discuss everything from employee theft (it happens very often) to “not drinking at your own bar” (which is less about getting drunk and more about remembering that you may not be your own customer) to getting one-star reviews (as we have said, how you respond is almost as important as what the original reviewer said).  A couple highlights include:

  • Buyback analysis.  Regulars and good customers get “buybacks,” or free drinks or food at some point.  What you might not know is that this isn’t random.  A great example that is shared is of the customer who is, without fanfare, getting up and putting a jacket on, but suddenly finds a fresh drink or an unexpected snack delivered to them.  He/she shrugs his shoulders and, not in a rush, sits down to the buyback, which inevitably leads to another purchase of food or drink.  The best bartenders are always observing when a strategic buyback makes sense for someone they’ve never seen before, and the best bar owners make sure that there’s a coherent buyback policy for regulars that everyone is on the same page about.
  • 86ing customers.  One of the great satisfactions of owning a business is being able to fire customers who are rude or who don’t seem to understand boundaries.  Alas, this is a regular occurrence at a place that serves alcohol.  The various situations the authors share only serve to underline the poisonous effect that bad customers can have not just on other customers, but on employee morale.  Traditional businesses can really learn something from bar owners here.

Chapters 16 and 17 deal with closing a bar, and as business brokers, we’re obviously interested in exits and how those come together.  You get insight into the end of the bar Destination, which you’ve followed throughout the book, but you also learn that business cycles and trends also affect the value and saleability of bars.  If you’re the last Irish pub for sale when Irish pubs are on a downtrend, unsurprisingly your valuation will be lower, even if your numbers are great.

We think you’ll enjoy this unconventional business book, and if you want a sneak preview via a short video of the authors, you can find one from Audible here.

Need other recommendations for books?  Check out our Book Club series.  Got one for us?  Give us a call and we might add it to this series.

Podcast Episode 12 – Prepping for Due Diligence with Special Guest Dan Loiacono

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Dan Loiacono joins Andy and Doug to share his insights on Prepping for Due Diligence. Dan specializes in getting companies ready for sale, whether solicited or unsolicited opportunities. He will share his thoughts on what drives value and what discount value, along with some helpful ideas for business owners of all sizes to consider right away.

4 Reasons It Might Be Time to Sell Your Business

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4 Reasons It Might Be Time to Sell Your BusinessOften business owners come to us long after they should have started to prepare to sell their business.  They realize, all of a sudden, that it’s time to sell.  Just like you want to obtain credit before you need it, you want to prepare to sell your business before you have to.  Below are some ways you know you’ve waited too long (and might want to give us a call for help).

You’ve Plateaued

If you’ve taken the business as far as your capital, competence, and contacts can take you, you’ve plateaued.  There’s nothing wrong with that; in fact, some people love a lifestyle business that they are completely in control of.  

But if that’s not you, and you’re looking for more professional challenges or more income, it might be time to acquire within your industry, or to sell.

You Dread Work

As a business owner, there is absolutely no reason you should dread work.  It doesn’t mean you need to spring out of bed singing every morning, but it does mean that you should be excited, or at least happy, to go to work.

If this isn’t the case, you need to find out if there are other personal reasons why this is the case, or if it’s related to your business.  If it’s the latter, your team will pick up on it, and their morale will decrease accordingly.  More than likely, so are your customers and vendors, and they might already be going elsewhere.

Another way of expressing this that we’ve heard from many business owners ready to sell is, “my heart just isn’t in it anymore.”

The Market Is Changing

Many businesses have to go through various changes not just in consumer preferences, not just in legislation, but in technology, both that’s used inside the office (like Slack) and what is facing the customer (like social media).  

You may sense another change coming in your industry and don’t want to deal with such changes anymore (like the business owner in this case study) or you’ve prepared for the change but think this might be a great time to hand off to someone with a fresh pair of eyes (and legs!) to carry on.

Other times a major shock happens (think of multiple-property vacation rental owners during worldwide lockdowns/closures) and people reassess and realize they don’t want to go through that again.  Those struggles drove many sales in 2021.

You Want to Make a Change

Some people want to make a change to their personal lives, but can’t do so because of their businesses.  While the attitude to remote work has entirely shifted in the last two years, perhaps your business won’t allow for it, or perhaps remote work isn’t what you need, but a break.

That break could be just for your own reasons, or it could be to spend more time with family, or to do something you promised yourself you would do years ago, and then seemed to forget that promise.  When that’s the case, the business is no longer an enabler of your goals and dreams, but an obstacle.  One of the final ways you can thank your business (and follow your dreams) is to change that obstacle into an enabling asset and pass it on to someone else.

If you’ve realized in reading this that it is time to sell, we’ve got a few first items that you should consider, which we are going to ask you about the first time we talk. 

Case Study #61: Turning Tragedy Into Triumph

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Feed CompanyThe top two reasons that business owners start moving towards a sale are:

  1. An unsolicited offer
  2. A major health issue

The second reason is what confronted Sandy Hansen Wolff in 2003 when her husband was diagnosed with leukemia.  He owned a business called AgVenture Feed and Seed that sold to regional dairy and beef farms.  It had great customers and solid employees, but had already begun to suffer from the health problems which took him away from his business before the diagnosis.

A Perfect Storm

The fear turned into a reality when Sandy’s husband passed away, leaving her as a 30 year-old widow in charge of a company with $1M in annual revenue but no documented systems or procedures, in a field that is male-dominated and which she had no expertise or experience in.

Additionally, the business had recently taken on debt to buy out a partner, which included a $500,000 loan (secured against Sandy’s home) as well as a 7-year payout.

Not only were there no policies and procedures written down, but employees didn’t even know what the margins were, or what they should be in comparison to the marketplace.

Sandy realized that her hope of restoring the business and getting it ready to sell in a few months, which was what her husband’s advice had been, was not reasonable.  She was going to have to get in with both feet.

Making Changes

From the pressure of the debt and with a desire to do something different in a fairly traditional industry, Sandy started moving in the direction of the “gig economy” long before that was a phrase anyone knew.  Instead of keeping functions and processes and staff in-house, wherever she could, she subbed out work to contractors.  A lot of skeptics scoffed at her, particularly because of her lack of expertise, but not only did the move stabilize finances for the company, it began to be imitated by other players in the business.

She slowly grew the business to a high of $8M in 2018, founding another business along the way, New Heritage Feed Co.  It was a chicken feed business that was using the infrastructure and relationships of the existing parent company to grow and thrive.

A Sale?

But, even as she got more and more excited and engaged in New Heritage, Sandy found herself slowing down with AgVenture, and taking a cue from books she’s read before about running businesses, she knew it might indicate it was time to sell.  She’d long since gone beyond rescuing the business to creating something that provided an ongoing and serious livelihood for her and her team.

There were also some discouraging changes in the marketplace.  Many farms were becoming corporate and some of the smaller farmers who didn’t sell out just sold up and left their farms.

She had had some discussions before with one of the feed manufacturers but the discussions had always ended with, “we don’t buy our retail partners.”  They were singing a different tune when Sandy called this time, in part because New Heritage was selling its own products that were starting to cut into the orders of this manufacturer.

Getting Serious

A first meeting led to a second in which an NDA was signed and they started to move towards a sale.  Sandy had seen that other similar businesses tended to get 4-5X EBITDA and along with this expectation she set out three conditions of the sale:

  • She wanted her employees treated well
  • She wanted the process to be amiable
  • She didn’t want to know the plans for the business after she left

Unfortunately, the first offer was unacceptable, with one of the members of the buying team clearly designated to play “bad cop” in the negotiation process.  It was refused but the second offer was also unacceptable, with an even more insulting offer for New Heritage, which was not part of the original deal, it being a separate entity.  

Sandy thought that at such a price she could just continue to run the business herself and walked.

Five minutes later, as she was driving away from the buyer’s corporate headquarters, their broker called, insisting that they wanted to do a deal.  Sandy pointed out that she had too, but the lowball tactics and manipulation had to go.

The buyer realized that their tactics were not working and came to something that everyone was agreeable to, which included an all cash upfront deal for Sandy, along with a 1% bonus on all gross sales for all customers that stayed with the new owners.

The best part, when Sandy signed the papers she was free to go: no earnout, no transition period, in part because she did what her late husband had not done: empowered her staff with processes and procedures so that they could run the company without her.

Lessons Learned

Sandy has an inspiring story, and offers some worthwhile takeaways:

  • Don’t be afraid to innovate, even in a traditional industry — by seeing the savings that could accrue with subcontractors Sandy took a risk that ended up paying off.  What cost-cutting measures might make sense for you that you’ve never considered?
  • Document, document, document — even though she took over a $1M business, it was one that couldn’t be sold.  By taking the time to create procedures, she created a company that could be sold.
  • Stand your ground — Sandy remembered a key rule of negotiation: always be willing to walk away.  This led the buyer to realize she was not going to be fooled by lowball tactics and brought the deal to a happy conclusion for everyone.

Have you had a health scare that has made you uncertain about your business?  We’ve worked with many similar situations before and would love to help.  Give us a call.

Podcast Episode 11 – Holding the Deal Together

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Veteran broker Jay Kvasnicka joins Andy and Doug to discuss several approaches to hold a deal together when it is on the brink of falling apart.

7 Qualities of the Best Franchises

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FranchisesFranchising continues to grow year-on-year and there seem to be ever more choices and opportunities in more and more segmented markets.  How do you spot the right opportunity?  We’ve seen our fair share of franchises over the years so we’ve put together a list of the qualities we consistently see in the best of them.  

Strong Brand Presence

The strongest brands have a great name, visibility, and buzz.

A great name instantly indicates what you do.  If you, as a stranger to a brand, respond with, “What does that do/mean?” to a brand name, that’s a reaction plenty of other people will have, and as Tom Brady says, “if you’re explaining, you’re losing.”  

The best names are worthless if they aren’t backed up by visibility: where is an example of the franchise running?  Is it creating a buzz that people are talking about?  If it’s been established for a while, do people still speak with pleasure and excitement when talking about the brand?

Proven & Profitable Local Marketing

The key here is “proven and profitable.”  You can ask for examples of current marketing materials to see how well done they are.  You can also call and ask franchisees how the marketing works and what sort of return they see on those local marketing investments.

Operating Manual & Training

While you’re unlikely to be given a manual or be allowed to sit in franchisee training until you’ve committed, this is yet another area in which you can simply ask franchisees:

  • How thorough was the training?
  • Did you feel prepared to run your business afterwards?
  • How is the ongoing training?
  • How detailed is the manual?
  • What online resources do you have to complement the training and manual?

“Use a proven system” is one of the major bragging points of franchises and the backbone of any system is the training.

Friendly Corporate Culture & Communication

This is one of the shadow indications of what franchise life will be like.  How do corporate staff interact with you on the phone?  What’s the feeling like at Discovery Day?  What’s the CEO like?  What’s the overall spirit at the corporate level?  Remember that this will directly affect your experience (and profitability) as a franchisee.

As with many of these qualities, ask the franchisees for what their experience has been like.

Franchise Association

Many franchisees don’t realize that it’s important to have a forum for their voices to be heard that stands apart from official company channels.  A franchise association that is recognized and approved of by the franchisor is an important quality of the best franchises.

Such associations offer a space to discuss brand and system matters while minimizing the distracting rabbit holes of individual disputes, which should always be between franchisor and franchisee.

Strong Standards

A simple question to get insight into the standards of a franchisor is, “Have you ever turned anyone down, and if so, why?”  A “Yes” answer isn’t required here, but it is reassuring to get a sense that standards beyond net worth and financial capacity matter to the brand, because every franchisee in the system, in a way, can affect you.  You don’t need to demand the tougher-than-Harvard-admission acceptance rates of a Chick-Fil-A, but strong standards do matter.

Territorial Exclusivity

This is a principle universally accepted by franchisors but uneven in its application to franchisees.  Don’t rule out wheeling and dealing with current franchisees who have locations that are more geographically desirable to you.  Just because a territory is “closed” doesn’t mean that deals can’t be cut.

Are you considering buying a franchise or a business run with the reliability of a franchise?  We might have some great fits for your personality and finances.  Give us a call.