Retiring Baby Boomers
The Census Bureau reports that Baby boomers own over 2 million businesses. As boomers age, they run into health problems, burn out, they will need to do something with their companies soon. Some plan to turn the keys over to the kids/employees or even close the doors after a lifetime of effort. Many others are seeking a buyer. The right buyer is likely to be a local and preferably a good guardian of their baby.
COVID- 19 has thrown a monkey wrench in those considered plans. Without the luxury to sit back and wait for the market to recover, it may have become more of a buyers market and a lucrative entrepreneurial opportunity.
Most people have a limited view of entrepreneurship — have an idea, start from scratch and make a go of it. That is a common misconception.
A more comprehensive definition of entrepreneurship is the pursuit of opportunity without regard to resources currently controlled. This includes buying an existing business, among the myriad of approaches. The opportunity is to use the gained experience, knowledge from a previous job(s), and fresh energy, with the resources of accumulated savings, loans, and any severance payment to propel an existing business.
Jeff Schuppe entered the entrepreneurial arena after being schooled at an established corporation. Even though his purchase was before the Covid 19 crisis hit, the experience has relevance for other aspiring millennial buyers.
Jeff was in his 13th year at the same company when a triggering event happened. The owner of his company hired someone in between them as his new boss. After exploring several alternatives, he warmed up to buying and building up an existing business. After meeting with multiple bankers, attorneys, accountants, and business brokers and exploring several businesses, he bought Schad Tracy Signs.
Schad Tracy Signs is a fully integrated design, fabricate, and install sign company in Oronoco, MN, that uses LEDs, inside and out, for retail and restaurants, banks and churches, and social media walls for interior branding. The company started with painted signage in 1979 and moved through neon, fluorescents, and now LED lite signs with aluminum, steel, and acrylic fabricated containers.
The owners who built up the company were facing retirement and had omitted several modern upgrades in technology, processes, and building. The opportunity was to modernize the plant and set it up for growth.
Immediately after purchase, Jeff allowed staff to let out pent up frustrations and provide ideas. He picked up on several of them and made immediate and broad changes:
- Employee compensation was brought to market rates.
- A comprehensive benefits plan, including health care, was added.
- Updated or replaced tools for the fabrication shop and installers
- Overhauled service equipment from forklifts, trucks, etc. and even office equipment
- Knocked down walls and made the layout more efficient
- Developed and installed standard procedures and quality inspection processes
- Two long terms experienced employees were promoted as managers.
- Jeff focused on a new marketing and customer building initiative through a revamped website and social media.
I interviewed a handful of the 16 full-time and 3 part-time employees to hear their reaction to these changes. They had been fearful that the company would be shut down and the assets sold when the previous owners retired. All of them were relieved and delighted with the wholesale improvements and revamping. They specifically mentioned having more of a say, better communications, improved morale leading to pride in their work, and feeling invested and engaged.
Since the transfer of ownership, the first quarter of 2020 was the best in about 10 years, with revenue up 17% and earnings maintained despite expensing most of the $200 K for the comprehensive changes after purchase in 2019.
The subsequent pandemic has caused physical, operational, and financial setbacks. Backlog kept the company busy till mid-March and then had to shut down. A cash conserving regimen was put in place, including a freeze on hiring and wage increases, buying smaller quantities of material, and postponing other capital expenditures. A PPP loan has helped greatly with cash and maintaining payroll! The team's underutilized time is being used to prepare for the new normal by cross-training, cleaning, and developing more efficient systems.
The salespeople worked hard and have brought new projects and new clients from the brand-new social media marketing. The company reopened in mid-April, with new orders from Wayfinding, hospitals, cities, and other essential businesses. Interior work and installing finished signs inside customer premises is still a problem.
Overall in June, the revenue is down 19% YTD over 2019. They have adjusted the business to a steady rate at that lower rate to be near break-even.
Despite the unexpected crisis, Jeff is pleased, “The purchase was the best thing that happened to me. I am also thankful that I had the time beforehand to make changes before this crisis hit.” He is scouting for additional acquisition opportunities in the field is a testament to his confidence in the future.
A version of this article first appeared in Twin City Business Magazine in August 2020.
To see other opinion columns go to medium.com/@rajivtandon.
Rajiv Tandon is executive director of the Institute for Innovators and Entrepreneurs and an advocate for the future of entrepreneurship in Minnesota. He is an adviser to fast growth Minnesota CEOs. He can be reached at email@example.com.