[EP 036] How To Sell A Niche Business

Owning and growing a family butcher shop

My first experience in business is a family business in the meat industry, owning a family owned retail and wholesale butcher shop…It was a business that moved from being a one-person business to have about six people full time in the business and grew to a substantial turnover. It was very profitable business.

– Martin Lo Surdo

What triggered your exit?

A major critical trigger for us was not actually having control of the premises. It was a property that we leased. I see a similar theme in businesses today. – Martin Lo Surdo

2 challenges to selling a meat business

• At the time, local business brokers there just didn’t seem to have the relevant experience in selling a meat business. Nor did we feel confident that if we put it out in the marketplace that there was an abundance of buyers.
• The context to this was, at the time in the late ‘90s there was quite a few butcher shops that were closing down. There was a little bit of negativity around the industry because of the major supermarkets that were actually growing their sales in meat promotions. It was quite a competitive space.

Solution: sell the business to management staff

Although our business wasn’t affected by the major supermarket, the industry was. That was the context. We thought it can be really difficult to get a sale price that would reflect what we thought was the value of the business so the best way that we thought we could achieve this was actually position the business to key staff members and have one of the managers buy the business.

And that’s what happened and that’s what we did it with them and that’s how we sold the business.

I would have preferred to put it in the marketplace to it to achieve a higher sale. But I just wasn’t confident that there was a broker on a day that would be able to represent us in that industry.

– Martin Lo Surdo

What insights did you learn from your experience in selling a niche business?

Every business has some sort of value. I’m sure it’s worth somewhere between zero and a trillion dollars. We just got to find where that is and what people will be happy to pay and what’s transferable.

Be more thoughtful about the type of person who would buy your business and be confident enough make direct contact with them.

Mate, take the time. Construct a hit list and make contact with them in a timely manner.

– Martin Lo Surdo

Go through a brainstorming process so that you can build some sort of potential competitive tension by having a number of possible buyers rather than pinning all of your hopes on the one horse, as it were. – Joanna Oakey

Don’t just talk to one broker. Maybe talk to a few. Just get the person that you feel is going to represent you and understand your needs more confidently.

Make the time to meet with the broker and different brokers of differing experiences and depending on what industry that you’re in versus or pitted against what experience a broker has as well as, their contacts in your local area.

More importantly, get on the same page as the broker as your agent, understanding that what you think the business may be worth is very similar to what the broker may think it’s worth in getting an appraisal for the business. That would be definitely the first protocol that I’ll be doing.

Understanding what someone else thinks the business is worth is really important because we all have our own sense of what we think our assets are worth versus what a buyer thinks they might be worth. A competent broker will think about what a buyer would value the business or what they are prepared to pay for it.

I think as an owner you need to know that. You need to get some sort of indication of what the market will be happy to pay for the business. Because you might even decide that it may not be worth selling. It maybe just worth keeping or maybe worth transferring to another family member, rather than selling it in the open market if you don’t believe it’s going to be valued as high as you think.

– Martin Lo Surdo

Our Free e-Books

Aspect Legal has produced a number of great publications that provide some simple education in preparing businesses for sale, and in getting ready to buy. These are particularly relevant if you’re a business owner gearing up for sale, or if you are gearing up for an acquisition.

But if you’re a business advisor and have clients considering a business sale or purchase, then e-books like these are also a great way for you to pass on information that is highly useful and relevant to them.

We at Aspect Legal believe that preparation is key. It’s true in life, and even more so with the M&A space. Being prepared will reduce your stress levels, reduce your costs and even make the process enjoyable – as it should be! So be prepared and get the best deal possible!

We have 2 ebooks available :

• The top 7 legal considerations in preparing for the sale of a business
• Buying a Business – a guide to closing the deal

We also offer the option of co-branding if you’d like to customise these documents for your clients by having your brand attached to it. Just click here and fill out the contact form to let us know you would like to discuss this, and we will be in touch.

Transitioning to the holiday park industry

I think the person that comes into a park business or tourism business is essentially happy to deal with people. It’s got to be part of your makeup that you enjoy dealing with people. You like interacting. For good or for bad, you’re there to help people. You have a high service orientation.

So whatever previous background that you had, I think these are the essential characteristics of successful park managers or owners.

– Martin Lo Surdo

Were you building the business to sell or is this a lifestyle business?

It was more about the future rather than the lifestyle because we just took it on as a business and not so much the fantasy of sitting on right on lawnmowers.

We actually control the land. I bought a freehold which means that we really had time to decide what we wanted to do in the future with it if we wanted to change our vision or to sell or not sell.

– Martin Lo Surdo

What triggered your exit?

Interestingly enough, 10 years later the business sold. It wasn’t even on the market.

There was a particular buyer that was really keen on this particular business and so it really ended up coming to a number where it made it worthwhile.

– Martin Lo Surdo

The difference between the first sale versus the second

The meat industry wasn’t a sexy industry back in the day when shops were closing. The old-fashioned butcher shops were closing down, and supermarkets were sort of dominating.

The holiday park business was a different industry. This is an industry that was highly desirable. The tourism industry the holiday park industry was flourishing and still is today, one of the strongest investment categories there is.

– Martin Lo Surdo

Here’s a summary of our take away tips!

• Start with the end in mind. Choose a business that’s desirable.
• Whatever industry you choose, enjoy it.
• Get educated about the value of your business and the process of sale.
• Brainstorm the potential pool of buyers for your business.
• Be proactive in approaching them.
• Find the right advisors and get professional advice.

You can contact Martin through:

• Website www.amplifybusiness.com.au
• Facebook https://www.facebook.com/amplifybusinesssales
• LinkedIn https://www.linkedin.com/company/amplify-business-strategy/
• Twitter https://twitter.com/amplifybusiness
• Phone 1 300 267 287

Check out our next episode with Martin where we talk about

• Franchising both from a franchisor and franchisee perspective
• Franchising as an alternative type
• Why do people get into franchising?
• What’s the benefits to the franchisor?
• What are the critical things to consider if you want to franchise your business in the future?
• When people are thinking of buying a franchise, what should they consider?
• Motivating factors or triggers of buying a franchise