–SINCE 1982–

[Podcast] Rob Amerine Talks Business Transactions & Selling Strategy on KRDO

Rob Amerine is guest speaker on KRDO’s, The Extra with Andrew Rodgers

The FBB Group’s, Senior Broker, Rob Amerine was guest speaker on KRDO’s podcast, The Extra with Andrew Rodgers on Friday, September 17, 2021.

The biggest misconception is thinking you can sell a business tomorrow, the reality is preparation for a successful sale can take 3-5 years. Rob talks about how to position your business for a successful sale, the recovery of businesses and the current market.

Listen below to hear about the importance of successful small business transitions, the pros/cons of starting vs buying a business as well as pros/cons of franchises.

Show Transcript:

Andrew: Welcome into the extra here on KRDO News Radio. I’m Andrew Rogers. And we’re talking about small business today. And joining me here is Rob and Amerine with the FBB Group. And Rob, thank you so much for joining me.

Rob: Yeah. Thank you. And Amerine.

Andrew: I apologize a little bit behind the scenes. Got done with some recordings right before we started just had Robin. So I apologize with that. And Rob, let’s start off with some of the basics. Tell me a little bit about what you guys do with the FBB Group and how long you’ve been in business.

Rob: Yeah. So the firm start in 1982, are our founder, Ron Chernak, came here from Chicago to open up a business to sell businesses here. So we’ve been established here and have worked, worked through the ups and downs of the economy and just really helping small businesses transition, whether that’s retirement or just more. We have buyers that have purchased many different businesses from us. And so there’s this market that you wouldn’t even hear about it. I purchased my first business in 2004 and I knew it went on, but it’s kind of behind the scenes. And there’s a lot of businesses that transact that through our firm and other firms like ours in this economy. And obviously, we know last year was so crazy when it came to businesses throughout the area.

Andrew: And how did that impact a lot of transactions and people kind of getting into or out of their businesses?

Rob: Yeah. So I get that question asked. And what I’ve seen happened back in April last year. Everybody was sitting back, going, what’s going to happen? No one knew. But by the time I came around, our buyer inquiries actually doubled from the year previously. So people came back in realizing that things were going to come back at some level. And what happened is that I think a lot of these business owners that things were going so well for so long in this Bull market, actually, this really upset that and made them realize that, hey, I need to really start thinking about retirement. I need to kind of get more my expectations in line, because when you’re making great money, it’s hard to sell. But that’s when you should sell it. So now that those businesses that had done pretty well up until COVID, some of them got affected, some of them didn’t. But it shook things up where there are a lot of buyers in the market. And then those sellers are really ready to sell and make a decision, knowing that they need to move more into retirement sooner rather than later.

Andrew: Yeah. And when you talk about moving into a retirement, what does that business sell look like? Does it look like just a complete, you know, here’s a check sign off LV assets of business hands off. Or is it something where there’s a little bit of residual income to kind of help with that retirement funding down the road.

Rob: Yeah. I tell my client said you’re never going to get done and say that was easy. Right. So there’s not just here’s a check. Here we go. There is a transition period depending on the timing. And it really depends on whether that business need that owner to operate or if the owners built themselves out of the business more where they have people in place. There’s a business here in Woodland Park that we sold recently where the owner had basically put a general manager in place. And that really helped transition to where if he hadn’t. And maybe it takes six months to a year. But because he had it was only a matter of a couple of months.

Andrew: Yeah. And when you’re talking about these, it reminds me I’ve got a good friend in another state who’s going through this process. He was the general manager of a company and is now in the process of purchasing the asset. Is that something? You see a lot where you see some of the internal people who might have been working or in high level management move into that ownership role once the time comes to sell.

Rob: Yeah. Absolutely. In fact, another business, we just closed on the same time type of thing. A project manager had been earmarked to purchase the business, and the owner came to us after basically going through that process for the last four years and realizing that just didn’t come through fruition. So he didn’t want to waste his time again. And we basically said, look, we’ll work with whatever buyer, but we’re going to go through the process. And that’s what’s important is that when an owner is looking at trying to sell, yes, you may have a great employee that may be able to have the right intentions and maybe even have the financial backing to buy the business could fall apart really easy.

Andrew: So where else do you go?

Rob: So we like to look at many different buyers. And if that buyer is the right buyer, then the process will work out. If it’s not, then you’re not wasting time and then getting yourself and having to go back to the drawing board.

Andrew: We’ve got a lot to cover here on The Extra. We’re going to talk more about the business process. We’re going to talk about those successful transitions as well as just some of the strategies and the health of the market as well. This is the Extra right here on KRDO News Radio.

Andrew: Welcome back to the Extra here on KRDO News Radio. My guest is our Rob Amerine with the FBB Group. We’re talking all things business, business transactions, just the health of the market as well. Of course, the FBB Group helps to transition businesses by purchase if you’re in that market. And of course, there’s a lot of things when it comes to making sure that those small business transactions are as successful as possible. And let’s talk about some of the things that people may not have be aware of or things should be taken into consideration to keep the business thriving, no matter who’s on the paper, as far as the owner.

Rob: Yeah. That’s a good . One of the issues we like to tell owners is to run the businesses if you’re not selling. So whether you’re actively on the market or talking with buyers or whatever it is, run the businesses you’re not selling, because that gets you make sure that you’re more profitable to get to the finish line than taking a break and kind of assuming too much in what’s going to happen, because that’s the thing. Things can change very rapidly with those type of transactions in that transition.

Andrew: And that’s where having the experts having firms like yours come in. It’s so crucial, because as you mentioned, things can go downhill very quickly, especially if it is that gentleman’s agreement, a handshake, just a very simple contract where you really need to have that full structure put in place to make sure that everything is successful.

Rob: Right. Exactly. And I think if there’s good trust on both sides, regardless of the contract, if you don’t have trust, it doesn’t work. But if you have that trust, you can really put that together. And it’s really the unknown, the expectations that have set. And instead of having something on the back of a napkin or a handshake or whatever, you put that down to make sure that both parties are on the same page, because those things come up late, even at the closing table where you walk away and you can’t get a deal done because of some sort of assumption that was made just wasn’t figured out.

Andrew: And that’s asking questions and getting through that getting attorneys involved and accountants at the right time. It’s not that you want to pay attorney a lot of attorney fees, but they do have a role in the process.

Rob: Exactly. And it is especially crucial.

Andrew: A lot of small businesses are family run as well, and that’s even more important when it comes to that line of succession as well, making sure that there’s nothing assumed or that you’re not dealing with the family politics and drama as well when it comes to the future of the business. Right?

Rob: Exactly.

Andrew: And you can’t avoid some of those things. When there is drama.

Rob: There is. Also something we tell our clients is that this is probably the single largest financial and emotional event that you’ll go through, especially those that have held their business for decades. It is a hard transition, and you don’t realize how hard it’s going to be until you go through that. And that’s what our role is is to really take a bit of emotion out of it, stay objective as we get through it, try to work with the parties and just make sure as a buffer we become that buffer a lot of times between even family members yeah.

Andrew: So as you’re talking about this and kind of navigating clients through this process, what are some of the biggest misconceptions that maybe people might have when it comes to that time to retire and fully sell this thing that they’ve really invested their livelihood and their life into for so many years?

Yeah. Probably one of the biggest misconceptions is that people think they can just go to market tomorrow and their buyers will come in. The process for preparing your business to sell is usually about three to five years out. So we like to talk to them early in the process, especially they’re working with their financial advisor, working with their account, whatever it is so they can plan. And we’ve had clients that have done this where they’ve come to us three to five years out, and then they call us the years later and they’re ready to go because they’ve made the changes to get to where their business, where they want to sell it and even at the price point. So again, we’re in the market every day. We do this day in and day out that you need that that set of eyes on things in addition to your account and your financial advisor to really know what your business is worth and what that transition is going to look like exactly.

And almost kind of liking you, too, in the real estate world, kind of the title company, some of those clothes in agents as well, who have kind of that pulse on how the market conditions are and how everything is going, how everything is going as far as the small business community here throughout Southern Colorado.

Rob: it’s going very well. It’s very healthy. I think there’s a lot businesses that have basically gotten through the financial stress test of COVID and COVID has unexpectedly revealed some of the weak points and some of the businesses. So they’re in terms of hiring and retaining employees and a lot of these things that just weren’t they weren’t an issue prior to COVID, right. And I’ve seen businesses that have no problem finding employees, and I have businesses that can’t find them enough, and then their pipeline is down this year. Now industry does matter depending on where the employees are coming from. But those are things that have really shown through this, and it’s really been helpful to see them do well through that, because then they’re head and shoulders above the rest now in terms of the business compared to other businesses on the market.

Andrew: Exactly. And what are some of the industries that are having that more successful rebound and seeing such a fruitful rebound from COVID 19?

Rob: That’s a good question. I would say manufacturing, especially construction businesses are doing very well, those that are more B2B versus B2C. So from that standpoint, but even some of the others that have been affected by COVID, it’s just how does their business changed to adapt and some of these business models have really adapted well where others are just kind of stuck, and they’re waiting for things to come back. And it’s just hard. They’re still waiting, but where others have recovered very well.

Andrew: And if you’re looking in the market, what are some of the key things that you and your firm are looking for when it comes to the health and viability of a small business, especially here in a post pandemic landscape?
Rob: Well, yeah. We tried to help everybody where they’re at in terms of whether they’re small or large business. We’re looking for businesses where the motivation of the sellers that they’re ready to sell, they’re just not looking to kind of put it to on the water and see what happens. You can do that. But we don’t want to waste anybody’s time, and we don’t want to waste the buyer’s time either.

Andrew: So it’s more of them being ready and both emotionally, financially and operationally, ready to sell their business takes time to put that in place. So the more that they’re coachable and saying, hey, I know my business, but I’m not an expert on how to sell a business.

Rob: That’s what we look for is someone that knows that, of course, the Internet will tell you you can do this on your own and to a level. And we have programs here for smaller businesses. We can help them sell their business, but for the most part, for purchase prices over a million dollars. It really makes a lot of sense, because they have a lot on the line to have a firm like ours in place and let us help you through the process years ago. This is not a linear process, and I look at it as don’t go out alone. There are people doing that, but those are the exception and not the rule. There’s a lot of damage control that we see where people come back to us and where they’ve tried on their own, or they try to do another way, and then it just hasn’t worked. And now you’ve now you’re recovering and maybe leaving money on the table.

Andrew: Yeah. And that’s where you’d mentioned as well to having that guide, having those experts like the FBB Group to make sure that everything does go according to plan. Then there’s not those hiccups or somebody left at the closing table. All of a sudden, everything’s gone so well, everything’s ready to go. And then one little hiccup happens and you’re back to square one. And really, all of your plans and your whole future is thrown out of the window again. Right?

Rob: Exactly. And we also like to say, too, there’s a wildcard so it could be on the buy side. It could be on the seller side. It could be an attorney, it could be an accountant. It could be some event that happens that changes the dynamic of it. We like to plan, but we really are an event driven business and events do happen.

Andrew: People get sick, there’s health issues, those things like that. And it’s always better to be selling when you have options instead of just saying, I need to do this now because then you really are limited.

Rob: Exactly. It’s such a fascinating world that a lot of people may not be that aware of, on average, how many businesses are bought and sold, saying an average month or quarter, especially here in Southern Colorado. You know, I was looking for some stats on that. There’s a website that is kind of the main one in the industry called Bibi Sell, and they do a lot of smaller transactions and is a market where they compare quarter to quarter, where there are literally hundreds, sometimes thousands in Colorado every year that are basically transaction you would never even hear about. And they transact, even online on some of the smaller sizes. So it’s really hard to pinpoint a number per se. But I would say most businesses transact through through a firm like ours versus not using a firm like ours until you’ve gone through it. You just you don’t see all that.

Andrew: Yeah. And it’s such a fantastic idea for such a interesting concept. Seeing how that side works. We’re so used to other purchases, whether it be real estate, cars, retail in general. But the business side itself, and it really is an indication of just how successful our economy is recovering. And still ahead here on The Extra, we’re going to talk about some ways if you want to get into that small business mold, it’s whether you’re starting or buying, we’re going to talk about some of the pros and cons of all of that. We’re going to discuss becoming that own boss. Maybe that entrepreneurial spirit is really starting to captivate you. Hearing some of these conversations. We’re going to talk more about the business of becoming a business owner, the business of buying or selling an existing business. Still ahead.

Andrew: This is the Extra right here on KRDO News Radio, 105 Five FM, 1240am, 92.5 FM. I’m Andrew Rogers, talking with Rob Amerine with FBB Group. Again, get more information to them at Welcome back to the Extra here on KRDO News Radio. We’re talking small business with Rob Amerine with the FBB Group. We’ve talked so much about the health of the market, some small business suggestions, some transitions, so everything goes into the process kind of that hidden market that a lot of us consumer level people don’t see as far as the overall purchases and not of small businesses. Now, Rob, let’s get into to maybe some people are thinking I could kind of get into that entrepreneurial loan.

Rob: I could get into that.

Andrew: Let’s talk about some of the pros and cons, especially when it comes to starting a business versus going through a group like yours are looking for one that’s up for sale.

Rob: Yeah. I think it’s a great point to kind of know how you’re wired and you want to be careful with, you know, what people can do, because I think as a small business, you’re going to wear many different hats anyways. But I think there’s those that are truly entrepreneur that can take something from nothing and turn into something. But then after a while, it can’t go beyond them. Those are more entrepreneur centric businesses where they’re basically they only grow so much the operations, all the things that are needed to go to the next level just aren’t there. But they had to start from scratch from somewhere where I put myself because I bought my first business in 2004 is buying an existing business and basically taking that and then building from there and being able to put in the processes and the operations around it to really grow it. And so that’s what I see. And I talked to buyers every day. I talk to sellers every day. And what I’ve seen across the board is is that you have those that just need to be able to buy a business that’s already existing and you have those that can start from scratch and then they can sell it off later.

Andrew: So it’s really kind of understanding where you’re at and kind of what is best for you. And it really is opportunity cost to three to five years is kind of the window to say, okay, if I start a business, could I be three to five years where this business is now? And what is that worth, right? Is it worth a million dollars or whatever it is to be able to buy the cash flow instead of trying to get there, taking all the risk and then trying to get there in three to five years versus buying something now and then maybe double or tripling it.

Rob: And that’s what I loved in our business. I’ve talked to buyers over the years. I bought businesses from us. We’ll circle back, they’ll call, we’ll go grab coffee or whatever and they’ve double triple the business from where they bought it. So we love to hear that. And that’s what we try to find good buyers and sellers. Exactly.

Andrew: And then when it comes to these purchases, say somebody’s out there looking at the market to buy a business. Are these people that are really looking to get hands on really get day to day in or there are some of them that are wanting just to make this kind of part of their investment portfolio here in the local market.

Rob: Yeah. You have both. I think it kind of depends on the size, smaller business called under a million dollar purchase price. You have more of what we would call the owner operator that’s looking to, in a sense, buy a job and run a business. Maybe they have left corporate or whatever, and they’re looking to come over and actually run the business. You get a little bit bigger businesses than over a million dollars of purchase price, especially over a million dollars of cash flow. When we work with those businesses, it’s more there’s a general majority in place, and there’s enough management team there that maybe their second level management that can come in and run it. So the owner doesn’t or the new buyer doesn’t have to actually come in and run the day to day, and you want to give the more options you can give a buyer the better.

Andrew: So if they want to be able to run it the themselves, then there should be a place for that. Or if they want to keep the management in place, having that option definitely increases your value.

Rob: Yeah. And it’s such an interesting position to look at.

Andrew: Then there’s also another side operation as well when it comes to franchises as well. Is that really something you guys dabble in a lot? And what are some of the things that people should be considering, especially, let’s say, drive by a Chickfila, which are almost a legal license to print money. But what are some of the things that people should be considering if they’re even thinking about becoming a franchise operator?

Rob: Yeah. That’s a good question. And I think it kind of goes back to how they’re wired, kind of knowing your strengths and weaknesses. And I think a franchise gives you a good backing and backstop to basically run a business and especially through COVID. A lot of the franchises, actually, I think, did better than some of the non franchise businesses because they had that backing fitness franchises. Other types of franchises that we’ve dealt with are basically they’re able to absorb some of that as a larger group versus just being on their own. So I think the franchise model, it does have its place, and it’s more for those that are just just looking to have a little bit more help through the process. There’s a lot of training involved. So when we sell a franchise, there’s typically a transition period. But the transition period is broken up between the training of the corporate franchise with the new owner versus the current owner.

Andrew: So with a non franchise, all that you really is coming from the current owner. And now when it comes to that franchise model, as somebody who’s been that before, obviously you owned and operated your own businesses beforehand. Could that also be something that could maybe be a training grounds, the sorts of maybe getting somebody who’s thinking about running and operating their own business kind of that idea to have that backing that training before they decide to move on and start up something of their own?

Rob: Yeah. I think it definitely gives them that extra little bit of incentive and we always talk about in terms of risk, how can you mitigate your risk or decrease your risk? So I think a franchise helps you decrease some of the risk. But of course, you pay for that. There’s royalties, and you have to give up some of that top line revenue to the franchise to pay for that to minimize your risk. So everybody has their different risk tolerances. So I would say those that are a little bit risk adverse. The franchise is probably a better fit. But franchise has been very successful, and it’s part of the local small business economy here. And it’s here to stay.

Andrew: Yeah. And as somebody who you’ve been a part of these before, obviously, you mentioned during the commercial break here a recovering engineer who got into running your own businesses as well. What are some of the things, just as somebody who might be thinking about it that you really counsel to find out what that risk tolerance is. And really, if getting into business ownership is really what they should be doing.

Rob: Yeah. That’s a good question. And I think I was in corporate America that really just didn’t appeal to me. I just didn’t see myself as a as someone that would stay in corporate. I like the movement, the flexibility of small business, being able to do things without having to go through a lot of red tape or committee. And I think that’s where I and there’s nothing wrong with people in corporate marriage is just a mindset that I think that you realize and I’ve talked to a lot of they have technical backgrounds, engineering backgrounds or computer science or software backgrounds that I can kind of tell that they are are just not in a place where they feel like they’re really doing what they know they can do. And so I look for that. And then and then it’s a matter of kind of matching them with a business to say, hey, let’s find a business you can really run with because you put in your time with corporate, you realize you’re not going to be there for another 20 years. So let’s get you onto a business where you can really get in and do the things you want to do.

Andrew: Yeah. And we’ve all heard the stories of serial entrepreneurs, people who are always trying to start up their new business or have some idea or leaving a stable job to go start up something, go try and get into the market, maybe competing with their previous employer. But it always seems to have that kind of six months mindset. What’s the key to knowing those limitations and knowing to be able to have something that is successful and sustainable throughout a longer term, not just have got an idea. I’m going to run out and do it. And six months later, I’m going to be back at Square One again, right?

Rob: Yeah. I think it all comes down to just not buying into the fear of failure because there’s always risk associated. I think there’s actually probably more risk even trying to keep a corporate job than actually going on your own, because you really don’t have the hands on ability to kind of move and kind of adjust where you can get a pink slip or the Corporation could say, hey, you’re gone tomorrow. So the idea that you’re going to fail and you’re going to make mistakes and to know that you keep pressing on and that persistence of saying, hey, how do I make this work? How do I take what, what my decisions I’ve made and how do I make them into learn from them and say, okay, let’s keep at this.

Andrew: Right. And I think that’s where serial entrepreneural come in that they’re able to adjust and learn and versus just saying, oh, they didn’t work and throwing up their hands and just say, I’m going to go do something else.

Rob: Right. So it’s that persistence that I think is what a lot of the qualities that I see and those that they’re persistent, even in spite of their failures, they’re persistent and they’re going to figure it out.

Andrew: All right. Well, we’re talking all things small business. We have the extra still ahead. We’ve got one more segment hours flown by. We saw much more on the extra right here on KRDO News Radio.

Andrew: Welcome back to the extra here on KRDO News Radio. We’re talking business with Rob Amerine of the FBB Group. Rob, it’s been so fascinating. I didn’t know that there was such a market to looking at buying and selling businesses like you guys do day in and day out of the FBB Group. And if somebody’s thinking about this or maybe there’s a business owner currently listening right now, what are some things that should be done now if you’re thinking about selling or not?

Rob: Yeah. And I would say basically, just let’s have the conversation.

Andrew: Right.

Rob: Let’s talk about where you’re at where your plans are. Look at if you’re talking to a financial advisor, kind of what’s the next 5-10 years look like for you. And what does the business need to basically produce for what your plans are financially? So as I was telling you offline that we offer a free evaluation. Now, this is not an appraisal. It’s not something you can take to a bank to get a loan on. But it’s really just a look at, and I like to call it more of a benchmark of where you’re at in the industry today compared to other businesses like yours that are selling with your cash flow and things and the different fats that your business because every business is unique and you can’t just do I hear these terms, these rules of thumb, and where someone is valued based on their top line revenue. Well, top line revenue has nothing to do with profitability. So business is doing $5 million of top line revenue versus another one profitability is going to be different. It could be different of thousands of a percent. So the idea is that we want to get into what is the true value of the business versus relying on rules of thumb or more of the textbook answers.

Andrew: Yeah. And that’s something, as you’d mentioned, is great for business owners, no matter what, even if it is just to kind of Mark where they want to go and looking at that to have that future plan whenever the day may come.

Rob: Exactly. Yeah. And just knowing where you’re at at versus relying on just your account, there’s nothing wrong with an accountant doing. They will look at it from a different set of different lens. Right. So we’re in the day to day accounts. Are they’re doing accounting work? They’re not in the day to day market. And we do have access to a lot of private data. Data is something we use quite a bit to really back up the valuations that we come up with, because that’s what it is today right now. It may change a year from now, which is why you want to look at that. Maybe every two or three years, if you’re not looking at selling in the next two to three years, but just something to check in with. Just say, okay. Where are we at today?

Andrew: Yeah. And of course, so many other options at FBB Group. And really, you’d mentioned you kind of have that police on the market right now. And you’d mentioned just the state of business here in the city is pretty good. And that’s just showing the successful recovery from the COVID-19 pandemic. And really, we’re continuing to see that success here at 18 months after everything changed last year.

Rob: Yeah. We’re seeing a lot of good activity. We look a lot of financials tax returns and profit and loss statements, and we see really good cash flow coming in and to these businesses. And it’s good to see sometimes there are businesses I said earlier are affected. And then the question is, okay, how do you pivot through your business model, whatever to really recover and that’s something important, too. A lot of businesses, though, have basically had to close our doors for whatever reason. And I think but new businesses are replacing them. There’s a lot of new businesses being registered. And of course, I don’t think it’s going to go back to the 2017 levels that we saw. But I think there’s a trend there, too, of new business licenses that have come every month that are coming in.

Andrew: And as you guys are looking at the markets as well, what do you think in the next couple of years have in store? I mean, kind of putting a little bit of a Crystal ball in front of you. What do you think is down the pike here in Southern Colorado?

Rob: Well, I think it’s been really good. I think as we’ve adjusted, but I think there is going to be a time where there’s some corrections. I have to go on supply chain, just some kind of a pendulum swing a little bit. But I don’t think what’s great about small business is that small businesses are resilient and they’re able to kind of weather that storm. So I don’t see for the businesses that we work with, maybe some of the larger businesses may be affected. I think they’re going to still do well if they’re managing their cash flow, cash flow is what is the driver. It’s a life blood of the business. And business and managers are cash flow. Well, we’ll probably be able to take those hits and be able to get through if they’re managing the cash flow, well, then they’re going to get caught when things these black Swan events come in. So I think it’s pretty positive. But we’ll see how these tax rates and things play into with some of the tax changes coming through with a new administration.

Andrew: Exactly. And again, if anyone wants some more information about everything, we’ve talked about, much more. All the services you have at FBB Group, what’s the best way to get a hold of you in the firm?

Rob: Our website is Very easy to remember. And then we’re available there. You can either submit in a request or give us a call and we’d love to speak with you and have a conversation.

Andrew: All right. Well, Rob, thank you so much for joining me here on The Extra. It’s been a fantastic, fascinating conversation, really looking at all things small business. And I really didn’t know that there was such a market. And again, thank you so much for coming and talking about what could be in the future for so many of our listeners. I appreciate it.

Rob: Thank you for your time. And this is great to be on on your show.

Andrew: Thank you so much. That does it here for the Extra on KRDO News Radio. Still ahead, we have the Tom Martino Troubleshooter Show that’s from ten to noon, we’ll get a check of all of the days top headlines with a news at noon then, of course, the Ramsey. So on Monday through Friday at one, get all of your other days top stories plus traffic and weather. KRDOs afternoon news call Springs only live, local afternoon news program. And, of course, don’t forget music under the mountains. The shop sit Briargate starting at five with some great country music at your we can start it off. Right. Thanks for listening to the extra right here on KRDO News Radio – 105.5 FM, 1240am,. 92.5 FM.