Nuts and Bolts for Business and Life

I’m a nuts and bolts kind of gal. It came as quite a surprise to me, since I really expected to be an academic or a social worker, but I worked in college as a computer programmer in a warehouse to get my Sociology degree. When I graduated, the only jobs I could find were in computers. My erstwhile skills in IBM’s RPG II somehow convinced my then employer that I was qualified to program Intel’s brand new 8008 microprocessor in assembly language (i.e. literally building a program out of 1s and 0s). I’m not sure how he knew that, but I did program the company’s first microchip-controlled word processor. You’ll learn more about my odyssey from there to introducing hub-based Ethernet to the world and announcing the protocol that made e-commerce possible if you continue to read my blog, but this brief resume, I hope, serves to explain why I chose “nuts and bolts” to describe my thoughts on business and life decisions.

Nuts and bolts=foundational ideas or concepts. So important in creating and steering a business or a life.

I’m a business broker and commercial real estate broker by trade. My job is to help business owners optimize their investment in their business—both physically and financially.  I help them determine the benefits of leasing vs buying (or selling) real estate at various stages of their business life, and I share ways they can plan their business to optimize their return on investment when they are ready to sell their business. I’m also there to help people who want to buy a business—as salary replacement, investment or as an extension to a business they currently own.

This blog is designed to provide insights on what I’ve learned over a 40+ year career and, I hope, generate interaction with you, my readers, regarding both strategic inflection points and the day-to-day choices and decisions that add up to a career and/or a life.

I hope you will join me for the ride.

Make or Buy?

There are good reasons for buying a business rather than starting one from scratch. Entrepreneurialism is a great thing, but it can be expensive and the risk of failure can be high. Statistics say as many as 75% of all new businesses are closed within the first 5 years.

I was working in the “Valley of Earthly Delights” when journalist Don Hoefler first popularized the term “Silicon Valley.” It was a heady time to be young and involved in bringing a technology to market (microcontrollers) that was going to change the world an bring computing technology not only to scientific labs, automobiles and manufacturing plants, but also to thermostats, home security systems and the ubiquitous smart phone.

Silicon Valley became the gold standard for creativity and for creating wealth. The bond between the employer and employee was broken during this period as valuable employees left companies to start their own operations, which often competed with the employers who had invested in training them. Employers, facing pushback from boards and stockholders, found employees to be expendable in market downturns as companies struggled to maintain profits.

But startups then were very different from startups now. Back then, a startup typically grew from the aspirations of a group of experienced technologists and managers who wanted to create revolutionary or evolutionary based on their experience in a company or multiple startups built by colleagues. There were a lot of experienced managers available to help them navigate the challenges of moving from innovative idea to sustainable company and there was a lot of money available to make sure the great ideas were viably funded. By the mid-‘80s, a Venture Capitalist complained to me that experienced managers were in short supply and by the ‘90s VCs were making multi-million dollar funding decisions based on one-page executive summaries, many from aspiring entrepreneurs who had never held a “real job.”

Today, entrepreneurs often have no practical experience and many of the ideas rest on cool ways to experience things on the internet—many that have no high barrier to entry. While there are some notable successes (often coming from attracting an experienced entrepreneur with deep pockets to the management team), today’s form of entrepreneurship results in a lot of churn, a lot of stock promises in return for inexpensive or free labor, and not much economic value other than to the coffee shops close to the entrepreneurial hotbeds.

This means that if you are an experienced member of the economy with a little money put together and a need or the will to go out on your own, buying an existing business is often a very practical and attractive way to “become your own boss.”

Business brokers provide a valuable service in facilitating the transaction between buyer and seller. Buying a business isn’t like buying a used car because the buyer and seller are very likely going to have to continue to interact in some capacity for months or years after the sale takes place.

The sale of a business is an emotional event. In most cases, the seller is letting go of something that has consumed him or her for a number of years. It’s not easy to let go, and it is particularly not easy to entrust everything you have built and the employees you have nurtured to a stranger. From the buyer’s side, you are being asked to make a huge investment based on a stranger’s claims about the company. Moreover, you are dependent on the seller to make a smooth transition, giving you all the information you need to be successful and letting you know what challenges may await you.

And then there is financing, most business sales are at least partly owner financed. Most businesses do not have enough tangible assets to meet a bank’s collateral requirements. There are options, which I will discuss in another blog, but the bottom line is that the seller needs to have enough confidence in the buyer’s ability to be successful to take a large financial risk, and the buyer has to feel confident enough in what the seller is offering that he or she is willing to put a significant amount of money down to make the deal happen.

The broker’s job is to work with both parties to ensure that the agreement is a win/win situation and that the seller and buyer will be able to work together for success. This entails marketing to appropriate audiences, making introductions, getting questions answered and facilitating the resolution of disagreements and misunderstandings. It also entails making sure that both parties are using qualified financial and legal resources to help hammer out the best deal.