Flip This Business!
We’ve all heard of the popular investment strategy used in the real estate industry that was so popular during the housing “gold rush” of a few years back. It was called: house flipping. An investor would purchase a home at a good price, rehab it, put it back on the market and sell it for a handsome profit. Great strategy while it lasted. People all over the country were making a killing doing this. The timing and other conditions had to be right or the plan would go bust. But the careful investor knew what to look for, which houses to buy, which could be easily renovated and which to walk away from.
That’s basically what I did when I purchased my cleaning business in the late 80’s. I had come from Corporate America and knew that a service business I could grow would be something viable that I could get excited about. I researched and read about different kinds of businesses for months. I investigated franchise opportunities and mom and pops. I thought about starting from scratch. After much soul searching and more research, I discovered that for me, purchasing a business at a good price and growing it with the purpose of “flipping it” for a handsome profit was going to be my business dream.
Now came the task of finding the right business. One that wasn’t on the verge of bankruptcy or closing its doors was necessary. One that was doing so well that it wasn’t good deal was not in the cards either. So I sought the perfect business to buy. It needed to have a decent name and reputation, owners ready to move on and a viable income from day one. If not a great income at the beginning, at least the potential for greatness was a requirement.
Quite by accident, I learned about the desire of the owners of the cleaning company I used to sell their business. After many discussions and back and forth conversations, number crunching I was able to make the purchase (for 1/3 of the original asking price by the way).
My goal was to take my new little company to great heights, build staff, reputation, expand, make my mark, sell it for a profit and move on. I planned on this being at least a 15 year process. I put together a sketchy plan which changed throughout the years and forged ahead.
After a settling in period of less than a year, I began making gradual changes. My goal was to change from the philosophy of the previous owner which was “well, making a little on a job is better than nothing” to I need to make a certain profit margin on every job. So, I raised prices, lost some customers but the new ones were more profitable. I replaced some of the staff and hired additional people. I also changed the name of the company to better reflect my vision and image.
I redirected the target market to better enable the more rapid growth I wanted. Throughout this time, I learned the industry inside and out. I read and studied, attended everything I could afford to all with my vision of a profitable sale and the end of the rainbow.
One of the more important tasks was to systematize and streamline the operation of the business so that it would be a turnkey for someone looking to buy. I put processes into place for every operation and tested and retested those processes. I found new ways to do things and easier methods all with the goal of the future sale for profit. Everything I did moved me closer to my goal. I had financial goals to attain and I reached those earlier than expected so I just raised the goals to the next level.
Throughout the process, there was never a time that I didn’t think I would be selling my business and work toward that goal. There were times when I was ready to sell it earlier than planned, but I hadn’t achieved all I wanted so I kept going. Like the time when an employee cleaning a local community office accessed the computers during a cleaning and switched out all the hard drives. When this office turned on its computers Monday morning, another company’s information popped up. It just so happened that I served on the Board of Directors for this customer. That was a day I was ready to sell for sure.
Finally I was ready and listed the business with a broker. He was not successful bringing a buyer but one found be me while he was in search of a job. A deal was struck and closed. The price I received for my business was more than I dreamed I could get.
Here’s the secret: All owners will leave their businesses at some point whether they sell, retire, close the business or pass it on to family. At a point down the road, ownership will change by desire or by situations out of your control. The most important steps you can take today are the ones that prepare for that exit from your business. Every system, every process, every good will effort will count toward that eventual day. Your business is one of your greatest assets and unfortunately too many owners don’t treat it with the respect it deserves. No matter where you are in your business today or what plans you have for the future, putting into place the procedures and systems to build value will give you untold returns. It’s never too late to get started.