While businesses #2 and #3 were clicking on all cylinders, I restricted my efforts to financial support and control.  Doing so gave me the time to continue trolling for more businesses.  I would routinely get bites, only to find out they were time-consuming snags.  While perusing BizBen.com (a favorite site of mine), I came across a business in my strike zone: 65,0,10,25, low tech, easy to find and train employees, seller willing to help with financing.  To make things even better, it provided customers with an essential need, water. The company provided installation and service for electric water well pumps for residential and agriculture use.

My first concern was that the seller was represented by a business broker.  I was apprehensive about working with brokers because I thought it would affect my purchase price.  Nothing could be further from the truth.  Businesses are worth what they are worth. The market (at least this one) will not allow the seller to artificially increase the sale price to account for the broker’s commission.  As a buyer, I felt the broker was very helpful with both parties.  Setting a fair price, over coming objections and moving the process forward are key ways the broker can help complete the deal.  I can honestly say I prefer buying businesses with a broker involved.

Another concern was the owner’s daughter and granddaughter worked for the business and wanted to stayYikes!  Oh yes, and the shop was haunted.  Every Halloween the local reporter would do an article about how our shop, which used to be the town post office since 1911, was haunted.  I cannot confirm the shop was haunted, but I can confirm the owner’s daughter and granddaughter are card carrying witches.  I treaded lightly around black cats, not knowing if their employment was a deal-breaker for the seller.

freitas_post_office

The shop in Banta, CA

The seller of Business #4 was no Mr. Beasley, for sure.  He was not generous with his time or knowledge.  He was eager to close the sale and move on.  Still, I could see the potential, lots of high-margin parts sales with a low tech staff.  I was very interested in this business and the seller was interested in me.  I now had good technical and financial experience coupled with Mr. Beasley’s recommendations.  It was a great fit.  I came to terms with the seller for 50% down and 50% financed over 5 years at 6%.  After 8 weeks of training, the seller was gone.  Prior to the close, I did give plenty of notice to the daughter and granddaughter that they needed to find employment elsewhere.  In 60 short days, I was on my own.

Business #4 is an excellent niche business. It has good name recognition and many repeat customers.  The business is simple and has an easy inventory with a good markup.  The standard parts allow us to stock them on the trucks and provide all the necessary service in one trip, which customers love when they are out of water.  Overall, business #4 turned out to be a nice catch and dovetailed strategically and geographically with business #3.

Keys To Success

  • Emergency-based businesses have advantages, customers pay well for quick service and they instantly appreciate it
  • As a buyer, I feel the broker was a great help
  • All sellers are not created equal.  Be prepared to take over on day one
  • Sellers will help with the financing if they understand how it benefits them and if they trust you
  • Bring in your own key people to get things started right
  • Find your strike zone and learn to identify businesses that are a good match