Pass It On: Lots of businesses and lots of buyers coming to market

SBJ file

Jessica Harmison-Olson, with her husband Ryan Olson, became full owners of Maxon Fine Jewelry on Feb. 11.

Taking the Plunge

Brokers share their advice for buying or selling a business.

Buying: Focus on financials.

“A lot of people who have never owned a business want one that has to do with a personal passion that they might have. Buy a business that has a solid history, a growth trajectory, good opportunities for additional growth. A business is an investment.”

Selling: Ask the experts.

“Reach out to your CPA. Make sure you understand what your tax liability is so that when you sell your business, you really have a good understanding of that.”

-Joe Howard, Kingsley Group

Buying: Be ready.

“Businesses even today will sell very quickly if they’re a good business and priced appropriately. Don’t dawdle.”

Selling: Pick your moment.

“It looks like we’re seeing the front edge of a tidal wave of businesses coming on the market. That will depress prices – it’s supply and demand. With everything else being equal, you want to beat that rush to the market.”

-Jerry Myers, VR Business Sales

Some business owners can look around the office and see the future of the company.

As owners think about the future of an established business that may have started with a simple “What if …,” they have several options to choose from, like passing it to family, selling to someone they know or listing it on the open market.

For some, the next incarnation of a company will fall upon the person carefully seasoning the crust of a prime rib in the kitchen or presenting an unblemished marquise-cut diamond engagement ring to a customer.

That was the case for two local businesses. The restaurant Retro Metro was sold by the owner to his chef last year, and the owners of Maxon Fine Jewelry closed on a deal to sell the entire business to its managing partner and her husband just this month.

In the near future, industry experts expect a huge turnover in business ownership, in part due to a wave of retirements from older proprietors. Guidant Financial reports that baby boomers, the 76 million Americans born 1946-1964, own 41% of the nation’s small business or franchises and  78% are profitable companies.

Financial services company Equitable outlines five main types of business succession. Three of these – transferring ownership to an heir, selling to a key employee or selling to a co-owner – allow owners to present the business keys to someone they know and may have helped prepare for the opportunity.

The Retro Metro sale is an example of succession to a key employee, while the Maxon succession is to an employee who bought into the company bit by bit.

Case study 1: Retro Metro
Brandon Moore – Chef Tiny, as he’s known in the kitchen – and Hana Moore, his business partner, fellow chef and wife, closed on their purchase of the upscale Retro Metro on July 1, 2022.

This was not a case of entrepreneurs crafting every detail of a business from inception to opening night, though the Moores have been with Retro Metro from the start.

Instead, the pair bought the eatery from boss and restaurateur Pat Duran, whom they had helped to launch the concept as an offshoot of another Duran property, Metropolitan Grill. The Moores brought a combined 50 years of restaurant experience to the table, including time at Metropolitan Grill.

Though the Moores have separate ownership of Retro Metro, the concept is inextricably linked to Duran’s business. Its theme, according to its website, is that it’s “dishing up Springfield’s greatest hits from 1994 through today,” with classic Metropolitan Grill dishes revamped for today’s diners.

The Moores operate independently, but they have enduring appreciation for Duran.

“Pat let us cut loose and do our own thing,” Brandon said, “but our relationships with guests, giving back to the community, incorporating a restaurant’s love for the community – we took that from Pat, along with everything else we learned from Pat over the years. And we were able to make it our own.”

The retro theme does not cramp the Moores’ style, Brandon said – quite the opposite, in fact.

“It’s really cool to see how people have responded to a restaurant that does things the old way,” he said. “I don’t feel like we’ve been hemmed in by sticking with just those old menu items. We’ve constantly been able to innovate, recreate and bring back ideas of cooking chophouse style, with a big cut of meat and big sides, so you have to have a to-go box when you leave.”

Case study 2: Maxon Fine Jewelry
On Feb. 11, Maxon Fine Jewelry managing partner Jessica Harmison-Olson’s to-do list might have included items like “recycle old business cards” and “change email signature line.”

That was the day Harmison-Olson and her husband Ryan Olson signed off on a deal to become full owners of the enterprise, which they purchased from the husband-and-wife team of Rick and Jane McElvaine.

Harmison-Olson says she and her husband incrementally bought into the business, starting in 2019 with 10% and adding a little more each year.

“It’s been in the works for several years, but the timing seemed right,” she said.

She said the McElvaines still love the jewelry business and they don’t want to stop just yet, so they’ll continue working at Maxon for the time being. They’ll also have a chance to relax, travel and make a move toward retirement.

“We can lean on their expertise,” she said. “It’s the best of both worlds for everybody.”

Harmison-Olson came to Maxon in 2016. She brought with her a background in accounting but no experience in fine jewelry. She had known the McElvaines since she was a child, and she decided to take the leap into a new industry.

Now she is up to her elbows in fine jewelry, including Rolex watches, for which Maxon is the only authorized dealer in southern Missouri. This year she says she’s focused on having a seamless transition. Eventually, she hopes to embrace new technology, like equipment that can determine if a gem is synthetic or lab-grown, to help her exercise diligence over estate acquisitions and other products.

“I feel very blessed for the opportunity from Rick and Jane, and I’m excited for what the future holds,” she said.

Broker sales
The other ways business succession happens, according to Equitable, aren’t about passing a ring of brass keys into a familiar hand. They include selling to an outside party or, less applicable to small businesses, selling shares back to the company.

Joe Howard, a business broker and co-owner of the Kingsley Group, handles all types of businesses, from Main Street-type establishments through major mergers and acquisitions.

Howard said it’s important for many business owners to be able to cash out because they need the retirement money.

“It becomes difficult for a business owner that’s spent years building a business to walk away with nothing,” he said. “For smaller businesses in particular, that business is going to be the largest asset they had. It’s their retirement. They can’t just give it to their kids.”

Howard said business sales are strong right now in the brokerage world. The trend he’s seeing is for businesses owners to call when they are ready to retire.

“They’re such a big part of the population,” he said of baby boomer owners. “We do expect to see an increase in businesses becoming available for sale.”

Kingsley Group is a Springfield brokerage with eight brokers and two dozen current listings, among them a dental laboratory listed at $550,000, an auto repair service for $169,000 and a wholesale distribution business for $4.9 million.

Howard said Kingsley Group is seeing a lot of interested buyers, with particular interest in manufacturing, service and tech businesses, such as managed information tech.

“Those sell very, very quickly,” he said.

Jerry Myers is owner and principal broker of the Springfield-Branson VR Business Sales office. Like Howard, he said it’s a good time to be a business broker.

“There are lots of businesses coming on the market, and lots and lots of buyers,” he said.

Myers said it’s a common dream to start a business from scratch, perhaps based on a personal passion. A baker might dream of owning a bakery, for instance.

“You never know when or if you’ll be profitable,” he said. “If you buy a business with proven cash flows, you make the assumption that the day after you take over the business, you’re making more money than you’re spending.”

Typical buyers who use a brokerage have been in the corporate world and had some success, Myers said.

“They’ve been able to set some money aside and they want to get out of the corporate world and do their own thing,” he said. “They might envision producing a product as being much more satisfying to them than pushing papers at a desk all day.”

Myers said VR was one of the first business brokers to operate across the country, and the company has sold more than 100,000 businesses to date. The Springfield office has ranked in the top 10 worldwide VR offices for the last three years. Myers noted his last sale was an individually owned moving business.

The VR website showcases four new listings: a paving company valued at $1 million, a transportation business for $364,000, a home-based travel agency for $219,000 and a meal prep and delivery business for $217,000.

Manufacturing and service businesses always attract interest, he said, and they typically sell for somewhere between one and three times their historic cash flow.

“The No. 1 thing I tell buyers to look for is unrealized potential,” Myers said. “That’s finding something in the business that is subpar that they would know how to improve.

“The seller can’t ask a single extra dollar for potential, but if the buyer were to buy that business, put in a drive-up window and sales go up 40%, that’s free money to the buyer.”

Another piece of advice comes from Howard, who says that regardless of the type of succession an owner chooses, expert advice from an accountant is essential.

“Get a proper valuation so they know exactly what it’s worth and what its most likely selling price would be,” Howard said. “As a broker, I recommend they use a broker to sell it.”