Home : Blogs : Bill Roberts - "Baby Boomer" Retirement Planning : Financial Strategies by Bill Roberts

How Do You Sell a "Problem" Business?

I have a business for sale. Again.

I'm a business broker. I sell businesses. I've sold lots of businesses.

They all have problems.

In almost every case the biggest problem is the owner.

This particular business is one of my favorites. It has been around for over thirty years, but the last two owners have each only owned it only a couple of years.

Why is that? The original owners had the business for a long time. They took it from ZERO to SOMETHING.

The next owners also grew the business. They owned it for a number of years also. They bought the property the business occupies. They still own the real estate. They are the Landlords. They would have sold it to the next owners, but the buyers of the business didn't want to buy the property. Why not?

It was just "symptomatic" of what was wrong with their approach to running the business.

They only wanted to "stand behind the counter." They weren't into growing their business. When I sold it for them, it was with the idea that the next owner would take this great little business and "recapture" its lost glory.

Now it is a couple of years later and I have it back "FOR SALE" and the situation is the same. The next owner will have to fix it.

What type of business is this? It is a car rental business.

How much are they asking? $1,200,000.00 including the cars.

Is it negotiable? Of course, everything is negotiable.

Is it "fixable?" In my opinion it is an exceptional opportunity. It has "brand" awareness, it has good "core" business, and the market is there.

Why would somebody want to buy this business?
In order to answer that I will have to tell you a story.

My first sales job was with the Campbell Sales (as in Soup) Company in the Los Angeles area. The headquarters for Ralphs Grocery Company was at Third and Vermont, right in the middle of my territory. I didn't call on the headquarters (just the headquarters store) but my manager would take me with him when he made the call. I learned a little bit about Ralphs (now owned by Kroger) by this exposure. They had 47 stores at that time. The grocery business in L.A. is very competitive. They made MORE MONEY ON THEIR REAL ESTATE than they did selling groceries. I think that this principle still applies to most major retailers.

So, why would somebody want to buy this business? The car rental business is a great "vehicle" (no pun intended, well maybe a little one) to acquire commercial real estate. A really sharp operator might even franchise the business and then acquire the real estate for their franchisees. Do you suppose that somebody is already doing that?

So back to my original question, "how do you sell a problem business?"

Posted by Bill Roberts - "Baby Boomer" Retirement Planning on 08/15/2007 12:40 PM

Comments (10)

business, business broker, business opportunity, problem, commercial real estate, land, real estate, property

Post is included in group: Commercial Real Estate
Post is included in group: Investors
Post is included in group: Real Estate Investments
Post is included in group: Southern California Real Estate Forum
Post is included in group: Business Brokers

10 Comments on How Do You Sell a "Problem" Business?

AUG

2007

Ray Kroc once said that McDonalds isn't in the burger business... they are in the real estate business. The burgers pay for the real estate.

David, you got it exactly right. I had that very conversation with a client today.

Bill Roberts

Bill, To answer your "original question, 'how do you sell a problem business?'" it is all about finding out who can cure the problem - sell the solution

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR®
Mission Grove Realty

AUG

2007

Sounds like Ray Kroc. Oh, I see David already commented about him. Katerina

John, thanks for commenting.

Katerina, there is a reason Ray Kroc said that. It is because it is the case.

Bill Roberts

This blog was mmmmmmmm mmmmmmmmm good. (Get it?) :)

Chris, of course I get it, even if I hadn't worked for Campbell's I think that I would have got it. I'm just glad you got it. Thanks a lot.

Bill Roberts

APR

2008

Bill,

I like your post. There is always someone new that can see potential in a problem that the previous owners couldnt fix.

Bill:

This is especially a great opportunity for someone looking to reinvest 1031 exchange money in a replacement property and invest additional money in the business venture. As an experienced business broker, I'm sure you are separately allocating values to the real property, the personal property and the business good will.

[Aside to those who are still learning] By separately allocatinig values to these items, it is easier to attract an investor who already has money to invest in real property through a 1031 exchange (they have 180 days to replace the investment property that they sold). They cannot apply the 1031 money to the business good will or the inventory (unless they are also doing a personal property exchange as well).

Thanks for the great post.

Lisa

Bill, I had a good friend that had a small auto business and wanted to expand or at least make more money. He found a very good auto salvage yard for sale from a man that was retiring and it was located on a very high traffic commercial lot. He did an inventory on the wrecked autos and to his surprise the value was more than the asking price for the property and business. Well he sold the autos to be crushed for scrap metal cleared the lot off and sold it for a nice $ 500,000.00 profit. Years later he did the same thing in another town. Not that this has a thing to do with your question.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?