You Be the Boss
Ben Atkins wanted to escape both the corporate world and Minnesota’s cold winters. He found himself drawn to the Gulf coast, where his family members live and where he had been vacationing for 20 years. After exploring several options, he and his wife, Carrie, purchased a Sarasota sign company called Quiksigns in November 2007.
“It seemed like a good fit,” says Atkins, who spent 10 years in the hospitality industry before logging another 10 years at the security firm Guardsmark. “We were comfortable going in, in terms of the financing and what we expected to get out of it, but we also saw a lot of potential for growth and development in this market and nearby markets.”
Atkins isn’t the only one who sees such potential. Last summer, the Sarasota-Bradenton area was named the second-best market for small businesses in the country by Bizjournals, the online media division of American City Business Journals, the nation’s largest publisher of metropolitan business newspapers. According to Bizjournals, the number of small businesses has grown 25 percent here in just five years, and the area is one of only four markets among the 75 metropolitan areas rated to have more than 3,000 small businesses per 100,000 residents.
Numbers like that are drawing seasoned businesspeople who are ditching corporate America in order to become entrepreneurs.
“Sarasota is a magnet,” says Robert Servian, president of the Servian Group, a business brokerage firm that has been operating in the Sarasota area for more than 10 years. “People from all over the country, and from overseas, thanks to the Internet, know about Sarasota or at least the Gulf Coast. I would say that at least half of our buyers now come from beyond 50 miles.”
New England native Paul Lachapelle, an 18-year veteran of the high-tech industry, is one of those buyers. He and his wife, Diana, a CPA, relocated to the Sunshine State and purchased Sarasota Neon in May 2007. “We thought it would be nice to be able to control our own destiny and to have more control over the business than [we did] in a larger corporate environment,” he says.
A desire to own a piece of the corporate pie is a common goal among many businesspeople, especially the Baby Boom generation. By buying an existing business they can take over something that, in most cases, already has a proven concept, a brand and a customer base.
But buying a business is no walk on the beach. Servian, who won the 2007 top-dollar producer award from the Business Brokers of Florida, likes to point out that of the 31 million businesses that were expected to file tax returns in 2007, almost 60 percent reported annual receipts of less than $25,000 (see sidebar, page xx). Many of the people who call him—about 75 to 80 percent from the corporate world in the 45 to 55 age bracket—want to make $100,000 annually. It’s Servian’s job to find businesses with those revenues and to caution his clients about the differences in working for corporate America versus owning their own business.
“The first step in becoming a strong buyer is to really understand that this is a very complex transaction,” says Servian. “It is the largest financial transaction they’ll ever do, and it is life-changing.”
Servian advises potential buyers to do an initial self-assessment to determine their strengths, weaknesses and interests. But they also need to realize that these may not be enough to run a business. Running their own business, he says, is very different from working at someone else’s.
“What people don’t get, as a general rule, is that the skill set for you to be an excellent employee is not necessarily, or even usually, the same skill set that it requires for you to be a good entrepreneur,” says Jim Parrish, a certified business analyst at the Florida Small Business Development Center at the University of South Florida, which serves Hernando, Pasco, Pinellas, Hillsborough, Polk, Manatee, Hardee, Sarasota, DeSoto and Highlands counties. “You may be the best computer guru on the face of the planet, but if you can’t deal with people, you’ll never be a successful entrepreneur. Your skill at doing something may be necessary for you to succeed as an entrepreneur, but it won’t be sufficient for you to succeed. All the research says the No. 1 reason [why businesses fail] is lack of skill on the part of the owner.”
And though one’s interests and past business experience should be considered, they alone should not guide any decisions. “Keep an open mind in terms of the type of business you’re looking for, because the important thing is that you buy a business that you feel you can grow,” says Lachapelle. “You’d be surprised what types of businesses have strong growth. They may not be sexy on the outside, but when you look at their profit margins, they’re healthy, and they have huge growth opportunities you wouldn’t necessarily have thought.”
Before proceeding, a buyer should develop a good team that includes an attorney, accountant and broker to examine the transaction objectively rather than with “emotional enthusiasm,” advises Parrish. “People sometimes get so excited they put their judgment on hold, and that’s why it’s frequently helpful to have an independent party look at [things],” he says.
Once a buyer narrows in on a business, he should put together a package that includes information about his work experience and finances. “If you put this package together, sellers take you seriously,” says Servian.
The financial commitment is huge, and buyers need to have both money for a down payment and operating capital. They also need to have the confidence to put their own savings on the line. “That is the life of an entrepreneur,” says Michael Meerman, who bought James Place Island Grill in Venice three years ago. “Anybody who can’t stomach the components of being personally involved is not an entrepreneur, and they should really be an employee. Clearly there’s a risk, and that’s the spirit of entrepreneurship in this country. It’s measured risk—not uncontrolled risk, not risk without assessment or analysis—but it’s risk.”
If the buyer’s offer is accepted, he enters into a period of due diligence. “This will justify everything that has been said to them [about the business],” says Servian. “But only about half of the people actually do due diligence. Of those half, a quarter to a half do the due diligence that you or I would do. That’s a mistake.”
“If there were one thing that everybody should know, it’s that they should follow the tried-and-true due diligence practices and not let their heart rule,” agrees Meerman. “Because to become emotionally involved in the purchase of a business could cause a lot of problems [buyers] didn’t foresee or understand. In the end, it’s a business. I’m passionate about food, I’m passionate about working with my associates, I’m passionate about my customers, but in the end I’m even more passionate about being successful.”
Buying a business takes an average of about six or seven months, so having patience is key. “It takes time,” says Atkins. “You can’t get frustrated, and you can’t try to move faster than the folks around you.”
Buyers also must realize that once they take control of the business, they’ll be looking at hard work and long hours. David Del Purgatorio, who with his wife, Ninfa, bought the former Bellino’s Pizza in Sarasota’s Buccaneer Plaza on South Tamiami Trail, puts in 12 to 14 hours a day six days a week at the restaurant, now called Del Purgatorio’s Ristorante and Pizzeria. “That was the reason I never did this before, because I realized many, many years ago what the commitment would be, and I wasn’t prepared to invest that time into a business,” he says. “You can’t do this five days a week, eight hours a day. It’s not going to happen. You’ve got to work a minimum of six days, and you’re looking at anywhere between 10 and 14 hours in a day. And you’ve got to be ready for that.”
But even long hours and hard work don’t guarantee that a new business owner will turn a profit or increase existing sales right away. Scott Hudson and his business partner, Larry Jensen, bought a bar in Buccaneer Plaza last June. They redid the interior and now run the business as Tortugas, a Caribbean bar and grill. Both put in about 90 to 100 hours a week, and they’ve spent several thousand dollars on advertising.
“Unfortunately, at this time, we’re getting ready to run out of cash, and we’re still not up to the numbers we need to be,” says Hudson, who previously served as a corporate executive chef for the Ocean Club Resorts in the Caribbean and as a partner in the Bradenton restaurant Banana Cabana. “It’s a struggle every day. I would never do it again. So far we’re still paying our bills. If it’s not a good season, that’ll do us in.”
“We’ve found that it takes a little time to reap the rewards of your efforts,” says Sarasota Neon’s Lachapelle. “The timeline might be longer than one might think. You need patience, you need to know you have some operating capital in the event that things take a turn for worse, and you need to understand that you may be burning through some operating capital, especially in that first year.”
Having the built-in customer base that comes from purchasing an existing business can be a blessing. But it can also be a challenge for customers to adjust to any changes in the operation. When the Del Purgatorios purchased Bellino’s Pizza, it primarily offered takeout and delivery. They still offer those services, but they have also expanded the space to include a 30-seat Italian restaurant. They’re hoping to attract new customers but still serve those patrons who were used to calling up and ordering a pizza or some wings.
“You can’t alienate the customers we had previously,” says David Del Purgatorio. “You can educate them but not alienate them. That’s why I do what I do, why I still have the chicken wings and Philly cheese steaks and the other stuff, because this is what they’re used to.”
“Some of our existing customers have relationships with the old owners; they were comfortable with them,” says Lachapelle. “We had to come in and develop relationships with these customers fairly quickly, or else we’d open it up to the competition.”
So if buying a business can be difficult, and running that business potentially even more difficult, why are so many people interested in jumping the corporate ship to become business owners? For Atkins, having “the authority and autonomy to make decisions, do what I think is right and apply things I’ve learned are the most appealing parts.” He’s ready to be accountable for the decisions he makes, good and bad, and he hopes that his hard work will pay off—big.
“The most predictable way to build wealth is through business ownership,” says Servian. “You don’t have control over the housing market, you don’t have control over the stock market, but you do have control over your own company.”
Buying a Business Checklist
Robert Servian, president of the Servian Group
* Do an initial self-assessment. Determine your strengths and weaknesses and make sure you’re up to the commitment. Buying a business is complicated, life-changing and one of the largest financial transactions you’ll ever make.
* Create a strong resume; a detailed package that includes your work experience and finances so sellers take you seriously.
* Do your due diligence. Only half of all business buyers take the time to go through the financial and legal records of a business once the offer is accepted.
Jim Parrish, business analyst at the USF Florida Small Business Development Center*
* Make sure your skill set matches the business. The No. 1 reason why businesses fail is lack of skill on the part of the owner. Just because you’ve been an excellent and successful employee does not mean you’ll be a successful entrepreneur.
* Develop a good team. Find an attorney, accountant and broker who will analyze the transaction objectively, without your emotional attachment.
Michael Meerman, owner of James Place Island Grill, Venice
* Make sure you have the capital. You’ll need money for the down payment and operating expenses.
Ben Atkins, owner of Quiksigns, Sarasota
* Be prepared to wait. Buying a business takes six or seven months.
David Del Purgatorio, Bellino’s Pizza, Sarasota
* Be prepared to work. Owning your own business means long hours six days a week or more.
Percent of U.S. Businesses by Revenue Size (2007)
Annual revenue Percent of businesses with that revenue Under $25,000 57.8 $25,000 to $50,000 10.6 $50,000 to $100,000 8.9 $100,000 to $250,000 8.8 $250,000 to $500,000 5.7 $500,000 to $1,000,000 3.4 $1,000,000 plus 4.7
Under $25,000 57.8
$25,000 to $50,000 10.6
$50,000 to $100,000 8.9
$100,000 to $250,000 8.8
$250,000 to $500,000 5.7
$500,000 to $1,000,000 3.4
$1,000,000 plus 4.7