Business Is Booming

Business is Booming - Episode 9
Small Business Success Series Part 2

Narrator: [00:00:02] Business is booming! From the small mom and pops to the big industries. Our local businesses drive our economy and provide the products, services and jobs we depend on. Our host, Jennifer McCurdy, brings us these stories as she visits with the business owners and leaders of Fort Payne and DeKalb County, Alabama. And now here's Jennifer.

Jennifer McCurdy: [00:00:25] Welcome back to Businesses Booming. I'm Jennifer McCurdy, executive director of the Fort Payne Chamber of Commerce. And I'm joined today by co-host Stephen Smith for our second episode of the Small Business Success series. Stephen, thanks so much for joining me today.

Stephen V. Smith: [00:00:41] Thanks, Jennifer. We're having fun with this series and I hope we're helping some folks along the way.

Jennifer McCurdy: [00:00:46] So today we're going to talk about the part of small business ownership that doesn't always get the attention it deserves. Typically, we focus on starting businesses and on growing businesses, but we don't talk as much about exiting the business. So and a lot of people don't even think about that, to be honest. Even so, it's always easy to talk about starting a business and growing a business, right, but exiting is just as important. I mean, you've put all this effort into your nest egg, into retirement for most people, and you really need to be thinking along the way how you're going to make the most of your business and exit that business. And you have first-hand knowledge of that. So can you talk a little bit about what maybe people need to be thinking about who own a business and how to exit that business successfully?

Stephen V. Smith: [00:01:32] Well, sure. When we read about and hear about a company having an exit, it's usually some billion-dollar company, unicorns, they call them. We think about the founders that they're bootstrapping it and then they take on a lot of venture capital. They grow it like crazy, they take it public. They have this big exit, you know, they sell their shares and go off to live on some private island that they bought for the rest of their life. You know, we're primarily thinking about like software companies, tech-based companies. But the problem with stories like those, Jennifer, is that they're very, very rare and really they overshadow something. And that's a real simple truth that no matter the size of your business, whether you're doing $5 million in annual sales or $200,000 a year, you're going to have an exit. Now you may run a roofing company or a restaurant or dry cleaners, retail, auto repair, funeral home. You know, these classic mom and pop Main Street businesses, you're not going to run that business forever — at some point in your life, whether you choose it or not, you're going to have an exit and your work in that business will come to an end.

Jennifer McCurdy: [00:02:53] So when that happens, what are some options? What do people need to think about?

Stephen V. Smith: [00:02:59] Well, there can be variations of these, but really there are only three ways that an owner is going to exit their business.

Jennifer McCurdy: [00:03:07] All right, let's hear them.

Stephen V. Smith: [00:03:09] When it's time to exit a business. I like to say that you can close it, pass it, or sell it. And here's what I mean by that. Sometimes a business might be heavily focused on the founder, and they're doing most of the work, may not have a lot of real assets in the business. They're built up around your skills as a business owner. It's less about the business and it's more about you and it's more of a practice. So, you know, oftentimes, unless you have a transferable book of business or, you know, book of clients in an operation like that, you know, really your only option when you're wrapping up your career, you know, might be to turn out the lights and lock the door and say, hey, it's been a great ride, you know, and it's time for me to move on to something else.

Jennifer McCurdy: [00:03:59] That's hard for people to understand. I know people in the service industry, industry who have clientele because they're really good at what they do, who probably want to sell eventually. But there's no guarantee that those clients are going to stay with the next person because they're not you. So, I mean, how often do you think that would happen? Somebody could actually, in the service industry, sell their clientele or their business to someone and it be successful? I mean, what's the reality of that?

Stephen V. Smith: [00:04:30] Well, the reality of that is based on how intentional you are as a business owner about what your goals are and when you want to exit. You know, when do you want to eventually sell? Well, the time to focus on that is not hey, here in a few months, I want to get out of this. Really the right time to start preparing your business to sell is really a couple of years minimum. I mean, I know that might be discouraging for some people to hear that, but, you know, it takes time to unravel everything in an operation that's heavily dependent on an owner. Now, we talked about closing, but passing a business down to your heirs. Well, that's another option. And a fair number of small business owners, they try to pursue that because of the fact that they're a family-owned business. Their kids may or may not be involved in it, but they've grown up around it. And the founders think, well, the kids know my passion for it, and it would be great if I could pass this on to them. They could continue the legacy of what we've built here. Well, the problem with that is that sometimes the children may not have an interest in it. They may have other careers. They may not have knowledge or the passion of the business. So their interests, the children's interest, may lie in other places. It's interesting that just recently the USB Investor Watch report came out and it showed that 48% of heirs actually prefer to inherit the assets of the sale of a family business as opposed to actually just taking possession of the business and then having to run it.

Jennifer McCurdy: [00:06:12] And that can sometimes cause, for people who have multiple children who maybe are interested in the business, sometimes it can cause friction between the children who are taking on the business because some may be passionate, some may not. And I'm more passionate about it than you. So that's also something to consider.

Stephen V. Smith: [00:06:31] Yeah, absolutely. And I've heard some rough stories about that, you know, the family dynamic in the business dynamic. And, you know, sometimes that's like oil and water. And so really that brings us to the third option, and that is selling your small business to an outside investor or acquirer. You know, we've spent as a small business owner, we spent years building something of value. It's valuable to you. It's valuable to the customers you serve. It's valuable to the community you live in. You're providing jobs. So you're supporting people, helping them support their families. You've got real pride in what you've built as a small business owner, and you want to see that legacy continue. Well, if you found the right buyer, it will it will help ensure that that good work that you and your small business is doing, that that good work will continue, but they will also come in and grow your business in a way that maybe you never could or that you were never able to do.

Jennifer McCurdy: [00:07:38] And I think that's what maybe prompted you to have a real interest in this series and this podcast episode, because you wanted to make sure that you could equip people with some knowledge. And maybe some of that was hard-learned knowledge from the sale of your business. Is that correct?

Stephen V. Smith: [00:07:56] As a matter of fact, yes. Jennifer, my wife Michele, and I went through that in the middle of 2020 when our company was acquired by a group out of Oregon.

Jennifer McCurdy: [00:08:05] Tell us a little bit about your company, though. Just a brief so people have an understanding who may not know.

Stephen V. Smith: [00:08:10] So I left the newspaper business in 1996 on New Year's Day. My wife and I formed a little company called WordSouth. It was just the two of us. We were working out of a little bedroom in a tiny rental house with our two small kids. And, you know, we were real fortunate and blessed to to grow that company through the years. Fast forward to 2019. We had like 30-something employees. We're working with some great clients all across from Texas to South Carolina, from Florida to Minnesota, several states in between. And there were many things happening in the industries that we served and that really led us to looking for a strategic acquirer to come in and partner with us, to take our company, to get us to a level faster, something that we just couldn't do on our own to really scale up quickly. Well, in looking for that partner, we found one in a company called Pioneer Utility Resources out of Oregon, and it's a cooperatively owned communications company that, just like us, was working with electric cooperatives. And then also we were working with broadband companies. And so the partnership between us just really made a lot of sense. And going through that process, I guess it took about a year really just getting to know one another and then really probably close to another year of working through what that partnership might look like, going through the due diligence and just the hard work that it takes to get from, Hey, will this work to actually making that work. And, you know, I really thought I was prepared. I'd read all the books, I'd listened to all the podcasts I'd done, all the the studies about what that might look like. But it was, it was an experience that I learned a lot going through.

Jennifer McCurdy: [00:10:14] Well, Stephen, are you seeing any trends that might make this a good time to consider selling your small business?

Stephen V. Smith: [00:10:20] Well, actually, Jennifer, there are some very exciting trends taking place right now. We're seeing the confluence of two major movements, and they're creating some exciting opportunities for small business owners and for those looking to buy small businesses. Well, the first trend is that we're at the beginning of what people are calling the greatest transfer of wealth in human history. And when you think about baby boomers who are retiring, you know, it's a huge generation. They're getting to that age where they're passing along their assets and, you know, a lot of the assets of that generation that they're passing along to a younger generation, a lot of that's tied up in small businesses. So you've got all these small businesses that are going to be looking for new owners. And as we talked about earlier, that may not be the children that may be selling those and passing along the assets instead to the heirs. So there's a tremendous opportunity here where millions of small businesses are going to be available. Now. Sure, some of those may fall into that category that we talked about, that there's nothing really transferable there. But, you know, some surveys are showing that maybe as much as 60% of today's small business owners are hoping to sell their businesses in the next five years. And that is a tremendous opportunity.

Jennifer McCurdy: [00:11:48] I'm sitting here thinking, is there a hub of some sort where people can who are interested in selling can list their building or not their building, but their company? So that and even in categories that would be nice to have so that people can see I'm interested in this type of business. And here are businesses in this region that kind of meet my needs that I might want to consider purchasing.

Stephen V. Smith: [00:12:17] There are online directories, but a lot of transactions actually take place off market before they ever get listed. And, you know, that's really where the role of business brokers come into play. And of course, there are attorneys and CPAs. You know, they hear about deals, too. But, you know, lots of times that business broker is the one who can really find that good fit. So while this trend is happening, there's another trend that's running concurrently. We're seeing this this growing movement referred to as "entrepreneurship through acquisition" or ETA. We've got a younger generation that's saying, why would I take on all the risk of starting a brand new business and competing with those who are already in business? Staffing up, getting the equipment, getting the expertise that I don't have. Trying to find skilled laborers and technicians and professionals to staff this company when there are so many businesses that are already running, they're already profitable. They're already cash-flowing. I can purchase that and I can, you know, that can be my entry into small business ownership by purchasing a business that already exists. So there's this whole "buy then build" movement where let's get into the business, go in and find inefficiencies, go in and bring in new technology, go in and make improvements. Get into the business and build it from there. So you've got all these businesses coming up for sale in the next few years. All these young people looking to get into entrepreneurship through acquisition. And these forces are coming together and really creating an environment where this could be the best time ever for a small business owner to really start thinking seriously about positioning their business to grow its value, to get that business to the point they can sell it.

Jennifer McCurdy: [00:14:12] Yes. And you've gone through that yourself. And I know when you decided to make that transition, you were somewhat prepared. It wasn't a decision you made overnight. I mean, several years you had prepared for this. But you still ran up against some things that were unexpected. And that's kind of today where you are as far as helping small businesses with their acquisitions and assistance in determining how to best turn your business over to someone else. Is that accurate to say.

Stephen V. Smith: [00:14:50] When I got serious about, Hey, what can I do to get this business ready to sell to one day take to market? I didn't know if that was going to be a year from now. Two years, ten years. But it's something that I knew we needed to be working on even at that. When it came time to go through the process, there were things that internally caught me off guard. And certainly I knew that I learned a lot about operational issues, financial issues. But, you know, emotional and mental issues, you know, the whole mindset. There are things that when you're a small business owner that I mean, you created it. It's part of you and you're very, very close to it. And you can't separate yourself from that overnight. You just can't, I mean, you can't set that aside and say, well, this is a transaction. It's personal. And as much as you try to steel yourself against that, I mean, you're going to experience things. You're going to worry about your employees, you're going to worry about the company culture that you've built. You're going to worry about the clients that you've served. And often these are clients that you serve directly that you know personally. And you've known them for so many years. You're going to think about those things. You know, this may not be a concrete asset of the business, but, you know, one of the assets that you have in your business is the goodwill, your brand and the goodwill of the company.

Stephen V. Smith: [00:16:19] And you've worked hard to build that. And now you're thinking about turning all that over to someone else and in some cases turning it over to someone that you don't even know very well. So all of these are things you're going to encounter when you start the process of selling your business. And as much as possible, you need to prepare for that. You need to be prepared for what comes next. Now, you may be like us in that we have continued to support the acquiring company at varying degrees and certainly through the integration. And we continue to provide, my wife and I, some level of service to them. And I'm currently serving in a fractional executive position with them now. It doesn't take up a whole lot of my time anymore, but I'm still invested in their success. Well, you may be the small business owner who, you know, you stood up from the closing table and you walked away and your involvement ends. But either way, you've got to know what comes next for you because you're going to find yourself saying, "Wow, my entire identity's been wrapped up in this business for so many years. What's next for me?"

Jennifer McCurdy: [00:17:38] I want to talk a little bit about that kind of going back to one thing you said about. Of course, whoever you sell to is probably not going to have your, line up exactly with you and your vision. I mean, that's just not reality. Do you think a lot of people get overwhelmed with the thought of that? And so they just keep putting it off and putting it off and holding on. But the reality of that is when you're gone, if something were to happen to you and you're gone, you've done no one any favors, your employees, your family, I mean, they're going to be stuck with trying to make those hard decisions for you. So and even as you did, you recognize that, hey, this industry is growing faster than we can. We need help. We need to figure out a way to partner with someone to get us to the next level and keep growing so you can sell. And that only helps you in the long run. I just want to emphasize people should not be over or business owners — it's a lot easier to say than do I know — should not become overwhelmed with the thought of it or the thought of selling your business or doing something with it. And I think you provide some services now. I mean, you talked about have a plan, an exit plan, and then know what you're going to do next. You're you didn't just stop doing things, that's not in your your being or Michele's. Y'all were y'all continue to do things to help small businesses. And I want you to talk a little bit about that. And that just kind of goes back to you can help people not be overwhelmed, hopefully, or as overwhelmed.

Stephen V. Smith: [00:19:25] Right. You know, this is something that I just can't get away from is the passion to help these small business owners who, you know, are where we were a few years ago and looking at an exit and however long it may be down the road, they don't know what time frame, but they don't know where to begin. So one of the things that we're doing is we're launching a new a newsletter and a website your listeners can learn more about that at iwanttosellmysmallbusiness.com so just go to www.iwanttosellmysmallbusiness.com and they can sign up for the newsletter there. We're also beginning to offer some life coaching, small business coaching under Rare Life Small Business Coaching program for those who are looking to begin to think about what that might look like, to figure out what's next. And to learn more about that, your listeners can go to rarelife.coach just www.rarelife.coach and they can learn more about that there.

Jennifer McCurdy: [00:20:25] I'm thinking of along the small business line and we have people oftentimes you know we hear the slogan all the time support your small business in your town and here's why you do that. It keeps people in town shopping, spending tax dollars here. Those tax dollars go back to the schools, to the roads locally, to everything local to keep your community growing. So the more small businesses we have in our community, that's more money going back into our community. And it's so important for having more things to do within the community. If you're able to invest in your community by having opening a restaurant or a retail store or even anything in the service industry or providing services such as Rare Life Media, something that will contribute and give back to your community in a meaningful way. And also you can make money doing these things. I think that's something worth looking at. A lot of times people think there's nothing to do here or and I'm getting off on a tangent. I know Stephen, and it's not really along our lines here and this might be another this is definitely for another episode of our Small Business Success Stories series. But you can invest in your community. I mean, if you have something that you're interested in doing, find a way to do it and you be the person to invest in your community if it's important to you.

Stephen V. Smith: [00:21:57] And oftentimes that investment, especially if you're a member of that younger generation that we talked about, the best investment you can make might be purchasing an existing business from someone who spent years building that operation. They have a good solid company with good cash flow that you feel like you can take to the next level. It'd be a great investment.

Jennifer McCurdy: [00:22:18] And grow that business. Yeah, and more than likely, a lot of people who own small businesses, they have that entrepreneurial mindset such as yourself, so they don't just stop there. Most of the time you will find people who own businesses to have multiple different businesses because it's just in their blood. They love it and those are the type of people we also love and want in our community because they only make your communities better. So Stephen, we've talked a lot about selling your business. Is there anything else that we haven't touched on that you can think of? And again, this goes back to things that we talk about, have so much more depth and are worth every topic, every point we make. I feel a lot could be an episode in and of itself, right? But it's not for everyone. So I think giving our listeners a little tidbit of just some talking points there and some tidbits of nuggets of information that they can take with them. And certainly, if you have an interest in selling your small business, iwanttosellmysmallbusiness.com. Is that right?

Stephen V. Smith: [00:23:31] Yes.

Jennifer McCurdy: [00:23:32] Stephen has lots more information, a lot more resources for you and can provide you with, I think some of the best information you can find. I've leaned on Stephen for years. Simple little conversations that we've had and I walk away always feeling better with, he's just a great advisor and I appreciate that, Stephen.

Stephen V. Smith: [00:23:55] Well,thank you, Jennifer. You know, I'd just like to leave your listeners with three things here.

Jennifer McCurdy: [00:24:00] Okay, let's hear it.

Stephen V. Smith: [00:24:01] So if you're a small business owner, you're thinking about selling your business. There's value there, but you know it's going to be hard. And the first thing is to expect that this could be the hardest thing you've ever done professionally. I mean, it was for me personally, and I think Michele would probably say the same thing. From a professional standpoint it's the hardest thing we've ever tackled. But don't let that scare you. Prepare yourself for that. It's a very involved process. You're going to be dealing with not just operational issues. You're going to be working on yourself, too. The second thing is you can't start preparing too soon. Like if you're listening to this podcast today, don't wait until tomorrow. Start thinking about things that you can do today to put your business in a position where if you're wanting to sell it in another 2 to 5 years, you just need to be very active about that. Don't think about this and study on it and mull over it, and six months down the road you've lost time doing that prep work because I mean, that's not going to be wasted work. Any work you do to prepare your business to be marketable will make your business a stronger business even if you never sell it. And the third thing that I'll leave your listeners with is, we talked about earlier, there's a younger generation of entrepreneurs out there who are actively seeking profitable, well-run cash-flowing businesses to acquire. And this may be the best opportunity that could ever come along for you for an exit, if that's what you want in your future. So don't be sitting there thinking, "Who in the world would want to buy my paving company? Who would want to buy my storage buildings? Who would want to buy my dry cleaners?" There are people out there who may not even live in this community. Chances are they wouldn't live in the community. But every day they're young entrepreneurs, buying businesses, becoming part of the community that maybe they're not even from. They're growing it into something better. There's a market there of buyers who are searching for businesses like yours.

Jennifer McCurdy: [00:26:07] And we want them in our community.

Stephen V. Smith: [00:26:08] Absolutely.

Jennifer McCurdy: [00:26:10] So be prepared and don't wait too long. You can never start too soon. I have so enjoyed this. I talk so much about starting a business as we've talked about and growing your business. But this is the first conversation we've had around exiting a business, right? And I mean, it's been fascinating to hear your perspective on it. And I appreciate you sitting down with me again. And we're not done, people. Stephen is going to be a regular co-host because, one, I just really enjoy having conversations with him and I know you all do, too. So Stephen, thank you so much for, again, participating in our podcast, Business Is Booming and we are going to link your website and some information from the chamber and some resources as well. So that will be linked under the podcast. Is that how that works?

Stephen V. Smith: [00:27:02] Yes, I think those will be in the show notes.

Jennifer McCurdy: [00:27:04] Show notes. That's what it's called. I'm learning, Stephen, I'm learning. That's right.

Stephen V. Smith: [00:27:10] I think we have some other exciting things to talk about in the coming weeks.

Jennifer McCurdy: [00:27:14] And the list keeps growing. There's so much and we hope we're providing some valuable insight and that's what we're here for. Thanks, Stephen.

Stephen V. Smith: [00:27:24] Thank you, Jennifer.

Narrator: [00:27:24] You've been listening to Business Is Booming, a podcast brought to you by Fort Payne Chamber of Commerce. The host is Chamber Director Jennifer McCurdy. Executive Producer, Stephen V. Smith, with assistant producer Emily Kirby. Our engineer is Lucas Smith of Lucky Sound Studio. Business Is Booming is a production of Rare Life Media.