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Jan 04, 2024

End Game: Exit strategies transition local businesses to fresh leadership

Selling a business you started 35 years ago, as Chris Corley did, can leave you

Selling a business you started 35 years ago, as Chris Corley did, can leave you drained while you’re plumbing new opportunities in self-unemployment. On the other hand, when you buy a business, as Josh and Deb Jones did, you may wind up with a pig.

Corley, 65, sold his Corley Electric Air in late 2019, leaving the new owner, Turnpoint Services, with 85 employees, annual revenues of about $13 million and a database of some 60,000 customers.

"I think that initially, it was the shock of, ‘Oh, my goodness, what have I done?’" he says, though he stayed on through 2020. "Then, toward the end of last year, I thought, you know, it's actually OK, I think I’m going to survive." He recently returned from a trip out West, including a stay at a dude ranch.

The Joneses, both 34, purchased City Scape Winery in 2015 and now plan to expand their Pelzer business with a 10,000-square-foot tasting room and production building on the 12-acre property — plenty of room for their months-old son, Silas, three goats and their porcine pet, Pinot.

Leaving their well-paying corporate jobs and taking on a winery and major debt, Josh says, was "pretty terrifying, but at the end of the day, we figured it would be a good risk to take — at least a fun story if nothing else."

Wayne and Anita Tamme simply wanted to retire after owning City Scape Winery for eight years.

They knew the Joneses as patrons of City Scape's wine shop and appreciated their youth, energy and work ethic. That's why they declined an offer from a company with bigger resources: "I don't think they had what we would hope for."

Hope is one thing; planning an exit strategy is crucial, advisors say.

"Begin with the end in mind," says Ben Smith, area manager and business consultant at the South Carolina Business Development Center.

A transition plan also helps optimize a company's value, he says.

Corley recalls purchasing a competing contractor's company in Spartanburg a dozen years ago.

"He had not set his business up to sell, and what he had to offer was a Rolodex and some very loyal customers," he says. "I paid him very little for his customers. I paid him only what I got out of it, not what he was asking for it."

Through the pandemic, Jay Offerdahl, president of Viking Mergers & Acquisitions, saw a burst of activity in the last two quarters of 2020 and a "pent-up demand" so far this year. He credits incentives from SBA-backed loans and government stimulus.

With seven offices, including one in Greenville, Charlotte-based Viking, which has closed sales on more than 600 businesses since 1996, primarily represents manufacturing, distribution, technology and service businesses: that is, pandemic-resistant enterprises.

When COVID-19 hit, Corley wondered whether he should have stayed on to lead his company through.

"Our company grew tremendously last year because, as an essential business and with everybody home, the demand was huge for home services last year, and it still is," he says.

Offerdahl sees a seller's market now, with the high unemployment rate creating an overabundance of individual buyers, some questioning whether to reenter the job market.

Without question, the Tammes knew when it was time to go. "Being emotionally attached to investments is not a good business decision," says Tamme, 68, who lives in Amelia Island, Florida.

Six years after selling the vineyard, they spent three weeks traveling to France, Portugal, Morocco and Gibraltar; they left Spain just before the lockdown. Anita died late last year.

Says Corley, "At some point, you’re going to transition, so start preparing for it much sooner rather than later, because it's going to happen."

Approximately 20% of all businesses are for sale at any time. Businesses don't put "For Sale" signs up like homeowners and real estate agents do.Nationwide, the "Main Street" business average sale price is just shy of $300,000.

Seller financing can play a big role. Sellers may finance as little as 10% up to 50%. In a recent Transworld Business Advisors deal in Greenville, the business owners financed 90% in a sale to their employee. (Consider: Buy a $1 million business with $100,000 down.)

The SBA aggressively incentivizes small-business acquisitions. That includes: waiving loan-origination fees; guaranteeing the lender 90% of the loan; paying the borrower's principal and interest for the first three months, up to $9,000 a month.

Many are first-time business owners and may be ideal candidates for franchise opportunities, which offer training, marketing, support, branding and so forth.

Source: "JT" Jim Tatem, Transworld Business Advisors, Greenville

The number of small businesses reported sold in 2020 dropped 22% compared with 2019, the largest year-over-year decline since 2009, when transactions fell 28%.

Some 7,600 businesses were reported as acquired in 2020, compared with 9,746 the year before.

Median sale price rose 12% to $279,950 in 2020.

Median cash flow of sold businesses grew 10.7% over 2019 to $135,567, while revenue increased 8.2% to $613,341.Source: BizBuySell Insight Report

A businesses-for-sale website lists 98 companies for sale in Greenville and Spartanburg counties as of mid-February. From bike shops to billiard parlors and from yogurt franchises to yoga studios, here's a sample of purchasing opportunities:

Plumbing company, SpartanburgPrice: $1 millionCash Flow: $583,000 Fourth-generation service providerEdible Arrangements franchise, GreenvillePrice: $495,000Cash Flow: $139,886 E-commerce switchable privacy glass manufacturer, GreenvillePrice: $250,000Cash Flow: $56,100 Switchable privacy glass replaces curtains with a switch that darkens the glass in less than a tenth of a second.

Soda and snack vending-machine route, Greenville, Spartanburg, Anderson countiesPrice: $89,000Cash flow: $19,250 (net)Includes 60 machines in 42 locations in assisted-living facilities, construction and manufacturing sites, among others. Includes inventory.

Boutique dog groomer and retail business, GreenvillePrice: $165,000Cash flow: $65,000 Ultrasound facility, GreenvillePrice: $326,795Cash Flow: $7,293 Serves patients ages 5 and older. Fully staffed.

Source: BizQuest.com

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