"I guess the problem is, there really aren't too many entrepreneurial types willing to take the time to teach themselves about the pawnbroking business," speculates the owner of the $890,000 pawnshop (April 1996). "I was really shocked that people didn't recognize this company's value." So were we. Thanks to Nevada's strict control over pawnshop licenses, the company possessed a market monopoly until the year 2026. Profit margins were also 25% and rising.
Without an acceptable offer in sight, the owner decided to merge the pawnshop with another, larger one he owned elsewhere. That accomplished his most important goal: freeing up his own schedule for more time with his family. "By consolidating both operations, I was able to combine managements into one single operation. We were also able to hold on to some valuable tax-loss carryforwards from the newer operation. In all," he says, "I have absolutely no complaints, because this really is a very profitable business."
The owner of the cinnamon-bun empire--actually, a bakery and restaurant based in a New Mexico ski region (August 1996)--also has no regrets about pulling his company off the market. Considering the strength of his business's reputation--his restaurant actually appears on local postcards--he feels he had nothing to gain from accepting any of the three "terrible" offers he received.
"I thought about one seriously because the price was pretty good, but in the end, the terms were just so awful," he recalls. "The buyer wanted to give me very little down and tie it all to these huge balloon payments. By the time I got through with the paperwork costs, I'd be in the hole. Then I had to ask myself, What if they couldn't make the balloon payments, ran the business into the ground, and ended up returning it to me in terrible shape?" Negotiations dragged on for nearly six months because the buyer seemed appealing in certain ways, including his "pretty heavy business background." But by the end, the owner reports, "I was sick of talking to him. If he had really been serious, we would have gotten closer to each other's positions."
Fortunately for this owner, two of his adult children had decided by that point that they wanted to get more involved with the business. "That was great because the main reason I wanted to sell was because of my arthritis--I just didn't want to keep working as hard as I was," he says. "The company itself is very profitable, and it's all for the best that I didn't sell if my kids want to be involved."
Jill Andresky Fraser is Inc.'s finance editor. Cheryl McManus provided research assistance for this article.
COMPANY: Florida Taxi Company
FEATURED IN: May 1997
ASKING PRICE: $200,000
# OF INQUIRIES: More than 60
RESULT: Serious interest, including some from other cab companies
COMPANY: Midwest Amusement Park
FEATURED IN: November 1996
ASKING PRICE: $5 million
# OF INQUIRIES: 10 to 12
RESULT: Still on market at the same price; recent upgrades include installation of a new $1.2-million roller coaster
COMPANY: Coastal North Carolina Blueberry Farm
FEATURED IN: December 1996
ASKING PRICE: $1.1 million
# OF INQUIRIES: 75
RESULT: Plenty of interest, but business still on market at same price |
COMPANY: Chain of Cosmetology Schools
FEATURED IN: February 1997
ASKING PRICE: $749,000
# OF INQUIRIES: 86
RESULT: About 10 serious potential buyers; negotiations stalled while waiting for owner's (recently filed) tax return
COMPANY: Minichain of Cinemas
FEATURED IN: March 1997
ASKING PRICE: $3 million
# OF INQUIRIES: 66
RESULT: Price reduced to $2 million; several serious bidders in the $1.5-million neighborhood, but owner won't lower price further
COMPANY: Northeast Bagel-Bakery Chain
FEATURED IN: October 1996
ASKING PRICE: $2.5 million
# OF INQUIRIES: 30
RESULT: Sale fell through hours before scheduled closing; price has been reduced to $1.6 million |
Source: VR Business Brokers, Newport Beach, Calif., June 1997.
The Brokers' Dog List
In a marketplace in which small businesses often have a tough time finding buyers, some kinds of companies are the most difficult to sell. Here's a short list that you won't want to find your company on: |
| TYPE OF COMPANY |
REASON FOR DIFFICULTY |
| Personal service |
Sales may be too reliant on owner's involvement |
| Franchises |
Involvement of third party complicates matters |
| Construction |
Sales--and value of company--are contract-driven and may seem unpredictable |
| Any company whose asset value is too high for its cash flow |
Financing costs in top-heavy asset deals (involving real estate or other pricey assets) look too great to be met by cash-flow prospects |
And the Rest?
Here's how the remaining eight companies featured in our Business for Sale column from April 1996 through May 1997 have fared |
|
COMPANY: Nevada Pawnshop
FEATURED IN: April 1996
ASKING PRICE: Negotiable
# OF INQUIRIES: "Many"
RESULT: Pulled off market for lack of acceptable offers; merged with owner's other pawnshop
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