A friend asked for my opinion on a biz for sale: • Owner aging out plus health problems • Lost ops leader, so took on role himself / less time selling • Declining industry hit hard by overseas competition • Business down 50% since COVID Owner says, "You can get back to old revenue easily." Do you believe him? Why? Why not?
@girdley #3 means that no, you cant go back to the old numbers
@girdley No. Hard to beat the overseas competition and as we know it is a fast way to the bottom especially if it is product related.
@girdley At a very steep discount it might make sense. 1 year owner earnings.
Nope feels like he isn’t selling Very interesting to me when they lose passion for the business, they hold onto the business way too long, then declines the value of the business because he should’ve put an ops director in . You can’t sell a fruit with no juice in it and most of the time the sellers hang onto the fruit too long
@girdley Probably not, but depends on the industry. "Declining industry" likely means it is an uphill battle and they have possibly lost the ability to correct the course given the "less time selling" piece.
Get the business under contract, with the requirement the current owner hires you as a commission only sales guy for 3-4 months to see if it’s true. If it is, you’re already locked into the price, and if it’s not, you get out of the deal. In the meantime, the current owner makes a couple extra dollars.
All businesses are on the march to obsolescence. They need to keep adapting in order to survive. Hudson's Bay Company started in 1670 by opening fur-trading posts in Canada. Today after iteration, M&A and bankruptcy, it's Saks Fifth Avenue and a discount department store called Zellers.
@girdley Sounds like whatever business it is doesn’t have a working engine without relying on the key man, so no, I wouldn’t believe him
@girdley If I already own a business in that area which is stable amd profitable; I would buy for a low multiple. I need my principal recovered in 1-1.5 years. 80% of the purchase price is held in escrow and released after 1 year based on customer retention rate.