Wednesday, July 30, 2014
PLACERVILLE, CALIFORNIA
99 CENTS

Undecided about marketing a local business

By
From page C2 | November 09, 2012 |

Normally, I can make up my mind about something pretty quick. Yes, no, now, later, red wine or white. Making timely decisions allows me to focus on the future rather than ponder what it might or might not be. Recently, I have been frustrated by my procrastination. I have spent too much mental energy (something I have less of with each passing year) trying to figure out whether or not I should list a specific property for sale. Normally, it doesn’t take me more than a couple of hours. What’s so difficult? Determine the value of the property, meet with the owners and evaluate their situation and we either decide to work together or not. This time it was different. The property wasn’t a house. It was a business.

Selling a business isn’t nuclear physics but it does require a different set of analytical and marketing skills than selling houses. About once every two or three years I get involved with clients who want to buy or sell a business. My largest transaction was a retail shopping center and my smallest was a small general store and gas station in Pilot Hill.

Most agents shy away from getting involved in listing and selling a business, and for good reason. Few business opportunities sell through the normal multiple listing service and cooperating agent channels. Currently, only four business opportunities are listed for sale in the county and there have been no reported business sales in the county in more than a year. There are some national databases where one can search for business opportunities but an agent that undertakes the responsibility of marketing a business is pretty much on their own to locate a buyer. Marketing is often handicapped by the owners who are concerned about employee and customer retention and don’t want to see a for sale sign in front of their establishment. Then there is the issue of confidentiality, profit and loss statements and tax returns.

The most difficult part of selling a business is setting the listing price. Evaluating a business isn’t as easy as determining the price on a three-bedroom track home in El Dorado Hills. There are few comparable sales and the ones available usually involve a different set of variables. Sale receipts and profits on identical franchised hardware stores in two different locations will vary greatly and, subsequently, so will their values. Estimating the value of a business requires establishing a price for the tangible assets, including real estate, equipment/fixtures, unsold inventory, and then there is the intangible “good will.” What value is there to a name?

My hesitancy involved two partners who owned a small winery in Camino. After years of building up the business, they decided they had different priorities that didn’t include wine or each other. I had been a frequent guest at their vineyard/winery over the years and enjoyed their company and their cabernet. I was confident that I could sell the facility but I had concerns about losing two friends in the process.

Working with business partners who have decided to go in different directions is like working with a couple that is divorcing. It can be time-consuming and emotionally exhausting. Both have different opinions as to the value of the business and their individual contributions. When attorneys get involved, it further complicates the issues with each party attempting to gain an advantage over the other.

Small real estate investors are primarily looking for future appreciation but the attraction to a business buyer is cash flow and profitability. It’s nice that a business may be centrally located or have ample off-street parking but before most people ante up big bucks to buy a business, they want to see where profits will provide them a return on their investment. The challenge with most small businesses (that don’t have stockholders and securities regulators looking over their books) is profits are often minimized. They may exist but creative expense allocation, capital expenditures and under reported income can be difficult to substantiate to a prospective buyer. How do I explain to a potential buyer the Lexus parked in an owners garage is listed on the books as a utility vehicle?

The value of existing inventory is always a disputed issue. With the winery, we had new and old wine in barrels and in bottles. Some wines were popular and sold well while others did not and would most likely be heavily discounted. The price of a new oak barrel is easily established by the invoice but what price do you put on an oak barrel that is 3, 5 or 7 years old?

Listing the winery for sale was too overwhelming. The partners and their attorneys would likely never agree on anything and I would end up spending time and money on a business that would never sell. Still, I did have the time and maybe I would get lucky. The indecision was mentally distracting me from my other business. Then I got a phone call that solved my dilemma. It was from one of the owners of the winery.

“Hey Ken, we have decided to patch things up between us and rather than selling we have decided to expand the winery. Why don’t you stop over and taste some of our new cabernet?”

Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his website at kencalhoon.com

Comments

comments

.

News

District 2 candidate statements tell of goals

By Dawn Hodson | From Page: A1

 
Sand Fire nears containment: 66 structures destroyed

By Cole Mayer | From Page: A1 | Gallery

 
Tails wagging over dog park approval

By Julie Samrick | From Page: A3

Quarter-acre fire in Kelsey

By Rebecca Murphy | From Page: A3

 
Schedule for Highway 50 blasting closures

By News Release | From Page: A3

.

Opinion

My Turn: Privatization of public services

By Mark Belden | From Page: A4

 
Policy book

By Mountain Democrat | From Page: A4

 
.

Letters

GDPUD management report

By Letters to the Editor | From Page: A5

 
District 2 supervisorial special election

By Letters to the Editor | From Page: A5, 4 Comments

Piano replaced

By Letters to the Editor | From Page: A5

 
Comments sign-in policy

By Letters to the Editor | From Page: A5, 1 Comment

Save the Guinea Worm

By Letters to the Editor | From Page: A5, 1 Comment

 
Large bangs

By Letters to the Editor | From Page: A5, 2 Comments

Private property gets no respect

By Letters to the Editor | From Page: A5, 2 Comments

 
.

Sports

Ex-Bruin lends a helping hand

By Steven Shaff | From Page: A8 | Gallery

 
Sierra Sharks finish middle of the pack

By Democrat Staff | From Page: A8

Roundup: July 29, 2014

By Democrat Staff | From Page: A8

 
Taz pull through for SSL trophy

By Patty Pope | From Page: A8

.

Prospecting

Nuns discover a pleasant place

By Lexi Boeger | From Page: B1 | Gallery

 
Bargains can be found everywhere

By Democrat Staff | From Page: B2 | Gallery

At a glance: Game time

By Mimi Escabar | From Page: B2

 
Barbecue dinner to benefit Blue Star Moms

By Mount Aukum Winery | From Page: B2

Stagecoach story takes riders on a trip

By Wendy Schultz | From Page: B3

 
Help needed to make cool ties

By Sew 4 | From Page: B3

Stroke and osteoporosis screenings planned

By Life Line Screening | From Page: B3

 
Gold Rush Days activities cancelled this year

By Sacramento Convention And Visitors Center | From Page: B4

Master Food Preservers: Tomato time

By Monique Wilber | From Page: B4

 
Build an author platform at the Library

By El Dorado | From Page: B5

 
Sacramento area museums offer summer fun

By Sacramento Association Of Museums | From Page: B5

.

Essentials

Weather stats 7-29-14

By Michael Raffety | From Page: A2

 
Building permits 6/2-6/2014

By Michael Raffety | From Page: A2Comments are off for this post

Crime Log: July 17

By Cole Mayer | From Page: A2

 
.

Obituaries

Lisa Oliver Rose

By Contributor | From Page: A2

 
Wallace Murrel Thomas

By Contributor | From Page: A2

Merlyn Wilbur Adams

By Contributor | From Page: A2

 
.

Real Estate

.

Comics

.

Women’s Health

Love the skin you’re in

By Noel Stack | From Page: WH4

Dump stress and improve your health, productivity

By Wendy Schultz | From Page: WH7Comments are off for this post

Women’s Health Expo

By Marshall Medical | From Page: WH8

Find the confidence you need to fight back

By Special to the Democrat | From Page: WH12

Our choices directly affect our health

By Special to the Democrat | From Page: WH14

They’re NOT your mother’s hearing devices!

By Marshall Medical | From Page: WH17