Business educator teaches buying, selling strategies in recession
January 15, 2010
Steamboat Springs — During a turbulent market that could incite distressed business owners to sell and opportunistic investors to buy, a local counselor stressed Thursday the importance of using sound principles for both.
Randy Rudasics, manager of the Bogue Enterprise Center at Colorado Mountain College's Alpine Campus and a counselor with Yampa Valley SCORE, drew a small crowd to Steamboat Smokehouse for a lunchtime seminar about how to properly assess a business for purchase or sale.
Although deals in small-town Routt County might sometimes circumvent lengthy negotiations — "You might hear somebody say, 'I'll sell it to you for $85,000,' and that's their offer," Rudasics said — that does not decrease the importance of thoroughly examining all aspects of a business and entering the negotiation armed with documents and details.
"Some of these deals are the biggest deals you'll ever have in your life," he said.
Rudasics said the due diligence of business valuation has two primary components: discovery and interpretation. In other words, get the facts and assess what they mean. For buyers, Rudasics said, facts to acquire include the business's financial history, recent and long-term; a multiyear financial forecast; market position, or where the business stands in relation to competitors; characteristics of the work force; market opportunities; intangible assets such as a brand name or a potentially hot product not yet on the market; momentum value, or whether the business's current value is affected by current trends; and more.
"Leave no stone unturned," he said.
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The same goes for sellers, who Rudasics implied should examine the buyer with as much diligence as the buyer employs to examine their business. In addition to a credit check and financial history, researching a buyer's criminal history also could be a good move, Rudasics said, espousing an "all's fair" perspective when it comes to business transactions.
"Even in Steamboat, business is war," Rudasics said. "We just do it without guns."
For sellers, Rudasics emphasized the importance of selling from a position of strength. That means making sure your business is performing at a peak level and avoiding cost-cutting measures such as "skimming," a likely commonplace habit that drew knowing laughter around the Smokehouse room. Recording all revenues, even those collected in a tip jar, can raise the value of your business, Rudasics said.
And sellers should not feel obligated to disclose everything to buyers.
"Never give your customer list out. That's where the teeth of the deal is," Rudasics said. "Never give that out until you see a check."
The Success Steps luncheons are held monthly to address topics of interest to local business owners.
Dave Harper, owner of the Oak Creek Motel, said he attended Thursday's event because he's planning for future retirement.
"I want to see how much money I can get," Harper joked.
Scott Ford, a volunteer SCORE counselor, said today's recessionary economy can give rise to unexpected business opportunities.
"When things are shifting, sometimes there are opportunities," Ford said. "I think at any point in time, any business in the Yampa Valley is for sale. The question is always, 'Is there somebody who can buy it?'"