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The Boomerang Business Sale

The Boomerang Sale

In my 30 years as a Certified Appraiser and Business Valuation Pro and as a Business Broker and M&A Intermediary, I have seen this happen several times.  Too many times!  Here’s how it happens and a few tips to make it less painful.  Maybe even, dare I say it?  Profitable!

I once helped a young man sell a flooring company.

When he sold the business, he stayed to help the new owner.

The new owner made a classic mistake.  He moved it to a new location, which he though would be better, but really it was because it was closer to his home.

You guessed it, the rent was double and other expenses increased and sales did not.

He also didn’t have the same personality and work ethic and within a few months the new owner was refusing to make payments on the $50,000 Seller NOTE.

A legal battle would have cost the new owner money he didn’t have, the NOTE as iron-solid, and so he basically walked away from the business.

One day the Young walked over to find the doors locked and lights off and the store closed.

BOOMERANG!!!

He went to the landlord, agreed to not take over the lease but to pay rent month to month if he could re open –which he did and a few months later he moved the business to yet a third location, connected with a hard-wood flooring guy and began installing as well as running a retail showroom.

By the next year the business really picked up and was now in the Half Million Dollar range!

He called me again to sell it and, short story, we did.  This time for $125,000 Cash and $125,000 Seller NOTE.

This time the next new owner was a Contractor himself and it should have worked.  He was buying it to do his own installs for himself.  However, this meant he was never at the store and, yes, the retail store began to suffer for lack of attention.

Again, the NOTE became a problem.

BOOMERANG!!!

This time, though, the Contractor actually hired him to part-time run it for him and so my Client made sure he got his NOTE payments first!   This got old after a while.  The Contractor was just too busy with other things and my Client was clear that he wasn’t going to stay forever.  So a few month later, he actually arranged to buy it back from the Contractor! The deal was a forgiveness of the NOTE and assuming several store debts for Inventory.

Bottom Line, He had already gotten the $125,000 Cash the second time, on top of the $50,000 cash the first time.  He was up $175,000.  Now he owned it fully and sold it a third and final time, all CASH.  His price could have been higher if he held a NOTE, BTW.  But this time he did move to Florida and in less than 5 years accumulated nearly Three Quarters of a Million Dollars between what he pulled out and saved (over and above his Owner’s salary) and his “nets” – all by age 30 – and established a new record for Pro Biz having sold the SAME Business three times, each for more than the previous time.

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