How To Sell a Play It Again Sports Franchise, with Scott Ward, Former Play It Again Sports Franchisee (How to Sell a Business Podcast, Episode 2)
On this episode of the How to Sell a Business podcast, host Ed Mysogland welcomed former multi-store Play It Again Sports franchisee Scott Ward to discuss his journey from opening the business to a successful sale. Scott discussed how he developed some of his team members into business owners in their own right, lessons in the exit process, managing employees during the sale, recommendations for other Play It Again Sports franchisees planning their exit, and much more.
How To Sell a Business Podcast is produced and broadcast by the North Fulton Studio of Business RadioX® in Atlanta.
Scott Ward
Scott Ward is a veteran of over 25 years of owning businesses. Successfully representing and consulting other business owners in lease negotiations in the technology, creative media, retail, and manufacturing industries, Scott’s unique perspective keeps in mind the owner/tenant’s long-term cash flow needs as a catalyst for the future health of his client’s company.
Scott is the author of Scabs, Scars and Pots O’Gold: True-Life Stories of a Successful Franchisee, available here.
Examples of Scott’s work include a young tech company expanding for the first time and helping to enable its current growth to include private and government clients worldwide. An industrial cabinet manufacturer successfully expanding to handle over 40 percent growth. Media agencies that need flexibility in their space to address the demands of sudden surges or shrinkage in client needs. And retail/franchise situations that come with issues of territory, visibility, and access. Scott has mentored five former employees to own their own businesses and applies these techniques in formulating winning space solutions for his clients.
Scott’s contacts and involvement in citywide groups give him an innovative perspective on trends in traffic, population, education, and economics. He is part of enabling organizations throughout metro Atlanta in realizing their missions by serving on boards or as an officer in Rotary International (Treasurer/International Director), The Chattahoochee Nature Center Board, The North Fulton Chamber of Commerce, Scouts BSA (adult training), Toastmasters International, The Georgia Production Partnership (membership, industry relations, and governmental relations) and Atlanta Theatre to Go Board. He is also a member of the Atlanta Commercial Board of Realtors.
Scott is a graduate of the University of Florida. Scott is also a public speaker and presentation coach. He loves fly fishing, and sailing and has been known to swing a golf club or two! His family’s accomplishments overwhelm him with pride. If you would like to share a coffee please reach out!
Ed Mysogland, Host of How To Sell a Business Podcast
The How To Sell a Business Podcast combines 30 years of exit planning, valuation, and exit execution working with business owners. Ed Mysogland has a mission and vision to help business owners understand the value of their business and what makes it salable. Most of the small business owner’s net worth is locked in the company; to unlock it, a business owner has to sell it. Unfortunately, the odds are against business owners that they won’t be able to sell their companies because they don’t know what creates a saleable asset.
Ed interviews battle-tested experts who help business owners prepare, build, preserve, and one-day transfer value with the sale of the business for maximum value.
How To Sell a Business Podcast is produced virtually from the North Fulton studio of Business RadioX® in Alpharetta. The show can be found on all the major podcast apps and a full archive can be found here.
Ed is the Managing Partner of Indiana Business Advisors. He guides the development of the organization, its knowledge strategy, and the IBA initiative, which is to continue to be Indiana’s premier business brokerage by bringing investment-banker-caliber of transactional advisory services to small and mid-sized businesses. Over the last 29 years, Ed has been appraising and providing pre-sale consulting services for small and medium-size privately-held businesses as part of the brokerage process. He has worked with entrepreneurs of every pedigree and offers a unique insight into consulting with them toward a successful outcome.
Connect with Ed: LinkedIn | Twitter | Facebook
TRANSCRIPT
Intro: [00:00:00] Business owners likely will have only one shot to sell a business. Most don’t understand what drives value and how buyers look at a business. Until now. Welcome to the How to Sell a Business Podcast, where every week we talk to the subject matter experts, advisors, and those around the deal table about how to sell at maximum value. Every business will go to sell one day. It’s only a matter of when. We’re glad you’re here. The podcast starts now.
Ed Mysogland: [00:00:36] Welcome to another episode of How to Sell Your Business Podcast. On today’s episode, I got to visit with Scott Ward. Now, Scott is a former franchisee of the Play It Again Sports franchise. And he was a multi-unit franchisee on top of that. And so, I wanted to visit with him, number one, because retail is a terribly complex type business. I mean, it’s dependent on, obviously, customers but more so on employees.
Ed Mysogland: [00:01:14] And one of the things that we found in our conversation is, the employees became who bought the business. And that’s a little bit different from the way a business normally is sold. I mean, it’s great to be able to sell to employees, if you can do it that way, but it’s not very often that you can. Number one, predominantly because of lack of capital. They may just not have that kind of access to capital to buy.
Ed Mysogland: [00:01:45] And so, we had the opportunity to visit through some of the things that, you know, how did he prepare the business to sell? He went through a couple of brokers, that it didn’t work out so well. And by aligning with the franchisor, he was able to come alongside of some of the people that he had been raising up through the organization to actually become his buyers.
Ed Mysogland: [00:02:13] And he wrote a book memorializing these types of adventures, as he put it, adventures throughout his career. And the book is called Scabs, Scars and Pots O’Gold: True Life Stories from a Successful Franchisee. And so, I found his story fascinating, and I’m certain you will, too. So, let’s get on with the show.
Ed Mysogland: [00:02:45] Good morning. I’m your host, Ed Mysogland. I teach business owners how to build value and maximize the value of their companies when they choose to sell, when they want to sell, how they want to sell, and for what they want to sell as far as value goes.
Ed Mysogland: [00:03:03] On today’s show, I am really excited to welcome Scott Ward. Scott successfully sold his franchise in the last few years and he authored a book, and that book is entitled Scabs, Scars and Pots O’Gold: The True Stories of a Successful Franchisee. And having done deals for a long time, I can tell you that most businesses don’t sell and a lot of people don’t talk about that. But to be successful in selling your business is certainly something to celebrate. So, welcome to the show, Scott.
Scott Ward: [00:03:38] Hey, thank you. I’m so glad to be here. And I appreciate the invite.
Ed Mysogland: [00:03:42] Well, I’m happy to have you. Before the show started, I began with a little overview of you, but could you go ahead and kind of cover your background and what you’ve been doing since you sold the company?
Scott Ward: [00:03:57] Sure. So, I spent over 25 years as a multi-store owner of Play It Again Sports stores as one of their initial franchisees back in the ’90s, and really grew with them and their kind of learning curve. And it was a great experience. It was a great franchise. It enabled me to do what a lot of franchises do for people. No one in my immediate family had ever owned a business or really completed college. And so, there was not a lot of that kitchen table, you know, business talk, a stratagem of things. So, the franchise really helped me with that.
Scott Ward: [00:04:35] And similar things when it came to exit, you know, I didn’t know anything, really. As I was aging through the franchise, they were as well as people came up for resale. So, that was actually very helpful.
Scott Ward: [00:04:52] Since I sold the business in the last four years or so, I realized being a community-based guy and a community-based store, I started thinking about what to do next. And I loved my community, I realized that property values and property taxes affect the money going into our basic communities. And then, I thought, “Well, wow, commercial real estate is a big portion of that. And if I can help other businesses with their leasing or purchasing of investment, and be involved in that same way,” that has provided a real meaningful second career for me in that sense. And it’s been a lot of fun because, let’s say, I’m one of the few commercial real estate guys now that’s actually owned a business, so I think about your cashflow.
Ed Mysogland: [00:05:38] You know what? And I have to imagine that that is a value add, because, you know, just being able to relate to, like you said, the challenges of cashflow and all of the trials and tribulations that go into just existing as a business owner. And I’m certain that your second career, you know, it’s all about doing just that, that you can relate and I’m certain that your clients appreciate that. So, I got a bunch of questions. Are you ready?
Scott Ward: [00:06:18] Hit me. Hit me.
Ed Mysogland: [00:06:19] All right. So, why Play It Again Sports? How did you get into that?
Scott Ward: [00:06:25] So, you mentioned my book, and that’s my opening thing in my little book, The Scab, Scars and Pots O’Gold. When I first come out of school, I was working actually for ad agencies and film production companies, and I was a writer. And I was sitting in my office looking out to the parking lot with the owner pulling in, in his really nice car, coming in a little late. And I’m thinking, “Wow. That’s pretty good. I should own my own business.”
Ed Mysogland: [00:06:52] Everybody should do it. It’s easy.
Scott Ward: [00:06:54] Yeah. And so, a film production company or an ad agency, but there was a little recession that came along, and that’s the first thing that budgets were being bad, we want people to add budgets. And I said, “Well, I had actually been a customer in this cool little sports store called Play It Again Sports.” And we were relocating at the time. My wife got a job offer coming back to Atlanta. And I thought, “Maybe let me check that out.” Because, again, I really wanted a community-based business and I’m kind of a tree hugger, hiker, outdoorsman, and I thought recycling, “What can never go out of business in a recession? Let’s see, sports, recycling. It was a no brainer.” So, that’s why I was investigating Play It Again Sports.
Ed Mysogland: [00:07:47] So, that was a conscious decision. I mean, you thought about what was recession proof and how you were going to offset it. Boy, that’s some good foresight. So, fast forward now, 25 years, how did you know it was the right time to exit?
Scott Ward: [00:08:05] Well, I always had this antsy-ness to do a little bit of something else. And my kids were early high school, and I started thinking, before they get into college, it might be a good time to transition before we get that heavy college payment. Again, thinking about personal financial cashflow. And how a lot of small to medium sized businesses, we live almost personally off that business cashflow. So, I’m like, “Okay. Let’s sell this business, I’m kind of burned out anyway, blah, blah, blah, like we all get. Let’s sell it now.”
Scott Ward: [00:08:39] And I listed it with a broker and he created this nice booklet for me and then I never heard from him again. And I even called, and so I was like, “Well, you’re not worth anything. Let me try someone else.” So, I tried someone else, and they were a little bit better, but they were still not really speaking to me in terms of how can we get your business better to sell in valuations. They just pretty much evaluated the way it sat. We’re trying to sell it the way it sat.
Scott Ward: [00:09:11] Even selling your home, at least the real estate agent comes in and says, “Hey, we need to stage this” or “You need to clean this up.” I found on the business broker side I wasn’t getting that. And then, I realized it, and really being a part of a franchise helped, too, because I had insight into what others were selling for or not selling for, specific same inventory and margins and sales and comps, and all these things. So, I’m thinking, “Okay. I’m just not ready.”
Scott Ward: [00:09:40] A-year-and-a-half went by, I was like, I just need to mentally re-gear myself – that six inch difficulty between the ears. Mentally gear myself up. Reboot this business. Kick it in the butt. Ramp up everything about it, about the EBITDA and everything else. And then, we’ll sell it right. So, that’s what I did. And we ramped up and another, I guess, six years went by. The kids were pretty much getting into college or getting out of college. And then, I created a five year business plan to sell the business.
Ed Mysogland: [00:10:18] Good for you. I can tell you, most people don’t do that.
Scott Ward: [00:10:22] Well, this hit me actually after I sold it. I mean, like a lot of us, our heads are in the weeds with our own business. But when I finally came up for air, I realized we, business people, either have this great product and service and we know how to sell it. And we take sales seminars to learn how to sell and learn how to market our business for the business that we’re selling, the service or the product we’re selling.
Scott Ward: [00:10:50] But then, when it comes to actually selling our business, we don’t do any of that. We just think you just obviously should know that it’s worth something, but you have to make it. So, in this five year plan, I had a three year balance sheet and penal management program. I, for three years, specifically worked on making and squeezing out every bit of profit and showing that profit. And, yes, I was going to pay maybe a little more in taxes here. And then, I had a two year marketing plan.
Ed Mysogland: [00:11:25] Good for you.
Scott Ward: [00:11:26] And I was able to sell it. Out of that two year marketing plan, I think I sold it in 18, 19 months or something. That’s when we finally closed.
Ed Mysogland: [00:11:36] So, who coached you on the plan or did you just put it together yourself?
Scott Ward: [00:11:45] The franchise helped a little bit. You know, at that point, again, as those years had gone up, we were on our learning curve together. Also, I had been elected to be on the Franchise Advisory Council for the whole country, so I did liaison between the franchisor and all the franchisees who are coming herding cats sometimes. They’re all very independent minded. But it was a great spot to be because I, again, had a broad view of the overall system margins, inventory, all the data that gets sliced and diced when you go into selling a business.
Ed Mysogland: [00:12:27] You know, there’s a lot of scrutiny. I guess I wanted to ask, well, first thing, so the franchise didn’t have a resale component. I mean, it’s a large franchise operation.
Scott Ward: [00:12:48] It’s so much better now. It’s so much better now.
Ed Mysogland: [00:12:51] Well, probably because of you.
Scott Ward: [00:12:54] They’re getting better. What you want, you want that in a franchise, you want everybody getting better and learning. At least you feel like your royalties are going somewhere if they’re getting better. So, I knew I needed a booklet. I knew I needed [inaudible].
Ed Mysogland: [00:13:11] Promotional material. Sure.
Scott Ward: [00:13:11] Yeah. And it lays out every single thing about your business. And that’s what I encourage anyone getting ready to sell their business is, you need to just be a total open book about every aspect, and that creates trust immediately.
Ed Mysogland: [00:13:32] Yeah, and it does. But at the same time, I think that there needs to be the appropriate phasing of information as you’ve developed that trust.
Scott Ward: [00:13:46] Yeah. Because everybody comes in kicking the can, “Well, how much do you want for it? I’ll pay for that.” And so, you had to submit your financial statements and they have to be approved through the franchisor. But if you’re selling an independent business, I would suggest you have the same exact criteria. You know, work with your business broker, such as yourself, or your banker, accountant, attorneys to say, “Okay. Here’s the minimum that someone is realistic about buying your business is going to have in personal assets so you don’t go any further.”
Ed Mysogland: [00:14:27] Yeah. When you were working or evaluating brokers, how did you select? I mean, you said the first one was a dud. Second one was a step above a dud. And I’ve always been pretty transparent. I think, you know, it’s better to have no broker than a bad one, because it just locks you in and your hands are tied. But what were your steps, and I guess if you could rewind it, what would have been the red flag for you on selecting someone to represent you?
Scott Ward: [00:15:09] So, when I finally did sell it, I did sell it without a broker, because at that point the franchise had ramped up their marketing of stores for sale and that type of thing. And I really felt good about my package. The second but is, part of the data that the franchise was coming up with was 70 percent of the sales for a store – and this is just unique to this industry that I’m within – would sell to either an employee or a customer.
Ed Mysogland: [00:15:44] Really?
Scott Ward: [00:15:45] So, they were like, “You just put a big sign on the door that says franchise for sale, owner retiring, transitioning,” whatever, and I fully instructed my employees and educated them as to their value to the business. And if anyone asks about it, how to guide them. So then, it was up on the National Franchise Board and then it was up on our personal website board. So, that’s how we started getting those.
Scott Ward: [00:16:23] But to your question, after being involved with the Georgia Brokers Association a little bit and I’m also in a succession planning group, in evaluating a broker, I would say, one, very clearly kind of almost like working with an accountant or an attorney, you set a scope of work and a timeline and expectations.
Scott Ward: [00:17:01] And then, you have something that you can compare maybe apples to apples. Like, this broker is going to put together this book, but then what are you going to do with it? Do you have other outside advisors? Initial consultation helped me create better value, perhaps, or suggest some outside coaching that can be brought in. And a realistic timeline from that broker knowing what it’s going to take to sell, because it’s just not going to sell. It’s not going to sell. It could take a couple of years or two or three years or longer.
Ed Mysogland: [00:17:42] Believe it or not, 53 percent of the time from engagement to selling, so that’s half, it’s 6 to 12 months.
Scott Ward: [00:17:56] That’s awesome. Well, you know because you’re a good broker.
Ed Mysogland: [00:18:00] Well, I don’t know about that.
Scott Ward: [00:18:04] You know where the people are that are interested in buying.
Ed Mysogland: [00:18:07] Well, that’s true. But one of the things you said, which is total counterintuitive, is that 70 percent of the buyer pool for the franchise is coming internally or a customer. And so, I guess my question is, how did you communicate to your employees that, “Hey, I’m selling the business. You’re integral to it and I don’t want you to be a flight risk.” I mean, in a brokerage environment, that is an absolute no, no, because that value is stuck in those employees.
Ed Mysogland: [00:18:56] Because everybody watches the movies, “You know, I’m going to get displaced. Somebody’s going to come in and break it up and sell the pieces.” And it doesn’t happen that way. It never happens that way. The value is in the employees. But, boy, I have to imagine that was a real big risk for you to communicate selling.
Scott Ward: [00:19:20] Maybe it was the communication and trust I had already built up with my employees. You know, it wasn’t like I was coming out of the blue with communication, “Oh, he’s never talked to us before about how the store runs.” When I first hire employees, I set them up. In fact, I mentored six former employees to go on and own their own businesses.
Ed Mysogland: [00:19:44] Good for you.
Scott Ward: [00:19:46] Three of them were Play It Again Sports stores, other Play It Again Sports stores in the region. And it was tough on me to lose them. But I told them, when I would first bring an employee on, I said, “If you’re here three, four or five years from now, you should be getting close to buying your own store,” or running your own or something. I would set them up of my expectation of them.
Ed Mysogland: [00:20:12] All right. So, that’s the expectation. So, as an employee, typically, they don’t have a whole lot of funding. I mean, the people that we have worked with that want to sell to key people, they may be operationally sound, but financially they may be short. So, did you bump into that? And if so, how did you get around it?
Scott Ward: [00:20:36] So, I would tell them my story. You know, I didn’t have a whole lot of funds getting going, but I had a little bit from a relative that passed away, not a whole lot, but just enough. But it was enough that I could put together a plan, and then present it to friends and family, and say, “Would you come in with me as an investor or partner on buying this franchise?”
Scott Ward: [00:21:05] And so, I just educated them as to how I started. And, in fact, when the employees would come in, again, I kind of go this about employee retention and how do you get better employees. You treat it more like it’s an entry level to a larger corporate professional. It’s not just this little retail store. This is an entry level position to the sporting goods industry, which was gigantic.
Ed Mysogland: [00:21:41] And still is.
Scott Ward: [00:21:42] Yeah. So, whether you’re going into engineering, product design, safety health, health care, medical, marketing and media, I would ask my employees, “What areas are you interested in, in growing your career?” And I would speak to them, “If you’re coming on, this is the beginning of a career.” So, I just spoke to them in more of executive terminology, even if they were part-time employees.
Scott Ward: [00:22:10] And I just think that it helped over time and that built the trust. So, when it came time for me to sell, swinging all the way back around to your original question, how did you talk to your employees about this, we were already having conversations about business plans and business models, what are our sales going to be. “Our margins dropped. Oh, gosh, that’s not good. Nobody’s getting their bonus.” We would really miss [inaudible]. I do well, you do well.
Ed Mysogland: [00:22:37] So, you were really a transparent owner from the beginning. I mean, that’s the way it sounds, because I know a lot of employees or a lot of business owners don’t want their employees to know the kind of money that the owner is making, because then they’re going to squeeze on bonuses and so on and so forth.
Scott Ward: [00:23:03] To be clear, they didn’t know how much I was making. I wasn’t that transparent. But just like any sales, we set sales goals, we had margin goals, and then we got rewarded for it. You know, when we first sat down, I said, “You know, I’ve been doing this 25 years. It’s awesome. I love it. But I’m going to be doing some transitioning. You wouldn’t expect me not to. I expect you to.” You know, I just put myself on that level and I said, “You guys are an integral part of this and we’re going to be putting the store up for sale and you guys need to be on your toes because the future owner could be coming in and watching or looking around.”
Ed Mysogland: [00:23:48] Yeah. And like I said, I mean, it’s so —
Scott Ward: [00:23:53] I worked hard. I didn’t have anybody.
Ed Mysogland: [00:23:55] So, with the franchise, I mean, one of the things that I guess I want to know has to do with technological obsolescence. Like, for example, do people still go into retail and buy? You know, I know we did. As our kids were growing up, when the the kids pick their sports, we always seem to be the last people to go to Play It Again Sports, and everything had been picked over and I had to go to full retail.
Scott Ward: [00:24:36] Yeah. But maybe you can at least trade in a tennis racket for a bat or a bicycle or a bigger bike.
Ed Mysogland: [00:24:41] So, I know Craigslist has kind of gone by the wayside. It seems as though a lot of transactions are now being handled by the people themselves. And I’m just curious to know how did you guys offset that.
Scott Ward: [00:25:01] Yes. The internet came on, it’s like a lot of things in any technology. And I almost kind of look at it in a judo versus karate tradition. Karate is kind of like force against force and judo is you take force and you go with it. So, when the internet and all this started coming on, all the price comparison, people would pop up and go, ” Walmart’s got it for this,” and they fan it in your face or something. You’d say, “That’s fantastic. We’ll match it.” But here was the thing, when you look at the bottom line, it says, “Oh, they’re all triple extra smalls in chartreuse, so if you really want the navy blue one in your size or whatever it is -” there was a lot of that that happened on the internet.
Scott Ward: [00:25:52] But we’ve just embraced that technology and used it to our advantage to help us sell our advantage. And the advantages with this particular model of business was that, at Play It Again, we gave you a full guarantee and inspection period of, like, ten days. So, you could take it to the ballpark if it was used or new, of course if it’s new, we’re going to like anybody give refunds on new stuff if it’s defective or whatever.
Scott Ward: [00:26:27] But you can’t get that type of easy return. And you’re also [inaudible] even more of a discount by bringing something in. We would start going through all the things we took and people would start thinking, “Oh, we didn’t think about the horse shoes we’ve never used in five years. We didn’t think about those little things. We need little kids bikes and we need baby seats.” And there are all these things sitting around in people’s homes. You start going through this list and they go, “Okay. Hold that and we’ll be right back.”
Scott Ward: [00:27:02] So, when we were getting price comparison, that particular franchise is unique in that we gave guarantees, we gave customer service, we would match the same price. On any given day on the internet, something could be up or down. Sometimes it was more expensive than what we had. And I’d say, “Should I raise my price for you?” And they go, “Oh, no, no.” So, we had fun with it. That’s what we did.
Ed Mysogland: [00:27:29] Yeah. And the funny thing is, at least the one locally that we have, I mean, it’s always busy. It is always busy, which is great to see. I’m really happy when local businesses are thriving. How did you value your company? So, I mean, you got some consultation from brokers, that’s true. But then, when you went out to do it yourself, what did you go to market with? How did you price it? Or were you getting guidance from – I know you said that the franchisor provided some market data on other sales or resales, did it hold true, multiples changed?
Scott Ward: [00:28:28] I would look at those, and so I had a rough idea from other market data, from other resales around the country based on inventory levels and what our sales were compared to their yearly sales. But then, the franchise had a relationship with an accounting firm, a third party accounting firm, not my accountant, that was new to the business that knew the resale business.
Scott Ward: [00:29:00] And because there are several different franchise groups, right? There’s Once Upon a Child and Plato’s Closet and Dialogue, and all those others, so this accounting group knew the Winmark branded properties. Because of that, I went to them and I think I paid $1,000 for them to do a complete three or four different styles of valuation on our business, which you’re more familiar with those than I am in this world.
Ed Mysogland: [00:29:33] That’s okay.
Scott Ward: [00:29:34] But there’s the cashflow model, the EBITDA model, the times, whatever. So, they did four of those and it came out, and I had them do that after the three years of balance sheet management that I had done. I was ready to go to market now and do my two year marketing plan, sell the business. And so, that’s when I was pulling together the final sales booklet and I wanted their valuation.
Scott Ward: [00:30:05] And they evaluated the business – I can’t remember if it was 12 percent or maybe a little bit more higher than what I thought it was worth because they knew the business. And here’s what’s interesting, maybe even as a business broker, there might be certain brokers that are better at selling convenience stores and some are better in restaurants or manufacturing or tech companies. But that really was worth my $1,000 because it was –
Ed Mysogland: [00:30:36] It was validation, sure.
Scott Ward: [00:30:37] … a bunch of money more than what I invested to get those valuations. And the education I got from them was one of those that I even knew about my business, but I didn’t know about it to talk about it. And that is, bankers look at your inventory. If you’re an inventory type company, you’re warehousing, distribution, whatever, you’ve got inventory as a part of your assets. They look at those inventory and say, How old is it? If it’s old inventory, it’s not worth as much. What are the terms?
Scott Ward: [00:31:11] If you’re a broker or a banker who understands that – that’s another thing, get a banker who understands your type of business. All bankers will say they can, but they can’t. They’re not all the same. Some of them specialize better in certain industries. But most bankers would look at used inventory and go, “Oh, we’re going to give you like $0.07 on the dollar.”
Ed Mysogland: [00:31:36] That’s where I was going with this, I was like, “Oh, my gosh. I have to admit.” Yeah, go ahead.
Scott Ward: [00:31:41] However, in a used situation, which there are tons of used – I just heard a statistic this week, like, 70 or 80 percent of Americans have purchased or sold something used in the last five years through some sort of used website, whether it’s these high end purses or whatever it is. So, that used inventory on my books, if I’m getting a 60 or 70 percent margin on used versus 35 to 45 percent margin on new, which one’s more valuable?
Ed Mysogland: [00:32:26] Sure. Yeah, you’re exactly right on the banker portion of it that when it goes to underwriting –
Scott Ward: [00:32:35] Oh, my gosh. The light bulbs come on. And then, you go, “Well, if it’s not turning fast, it’s old inventory. But if it’s turning fast, it’s just cashflow.” So, there’s a subtlety that then you have to educate your buyer.
Ed Mysogland: [00:32:52] Yeah. Yeah. No, and I can totally see that. And I did not think about it that way. And like I told you before, I’ve been doing this 30 years, I never thought of how you just described that type of inventory, you know, the margin associated with the – I knew it was hot. But I looked at it from a profitability standpoint, not necessarily as a collateral value.
Ed Mysogland: [00:33:20] So, I know we’re coming a little bit up on time, and I do want to talk about Scab, Scars and Pots O’Gold. That’s not just a book for franchisees, right?
Scott Ward: [00:33:34] No. My editor said I should niche it. And since I had a franchise, we’ll say franchisees. But it’s really an Aesop’s Fable for business. So, with Aesop’s Fables, you tell a story and it has a moral to the story. So, as Scabs, Scars and Pots O’Gold, I tell my true life stories from beginning to end how I went through everything all the way up to selling the business.
Scott Ward: [00:34:00] And my stories, I compare to true life examples of enterprise level businesses that did the exact same thing and mistakes I did. And they have room full of MBAs and CFOs and stuff, but they did the same mistakes. And then, there’s a business lesson moral to the story that resounds with no matter what size your business is. So, it’s an easy read. It’s kind of like, say, a Chicken Soup for the Soul or Who Moved My Cheese?
Ed Mysogland: [00:34:34] So, before we conclude, if I’m a Play It Again Sports franchisee, and I am just thinking about I know I’m going to have to do something in the next few years. I mean, what are my next steps? Regardless of a broker or whatever, what do I need to start thinking about how do I start mentally preparing? I know I can get the book. But before that, because I think the challenge that a lot of business owners face is mentally checking out as soon as I say I’m selling, they take a foot off the gas, and that is –
Scott Ward: [00:35:26] It’s hard.
Ed Mysogland: [00:35:27] Right.
Scott Ward: [00:35:29] It’s hard.
Ed Mysogland: [00:35:29] And so, I guess what are your final thoughts on these are the things you need to be thinking about.
Scott Ward: [00:35:37] So, with any plan, a good, well thought out plan, it’s going to have a timeline, and expectations, and goals to reach at each of those steps throughout your timeline. So, when you set out a reasonable timeline for selling your business, that gives you those expectations so that you don’t get checked out. Because you say to yourself, “Okay. Well, I’m where I said I’m supposed to be, so let’s keep at it. Because, here in another few weeks, I’m going to be at this next step, and at the next step, and I can see the light at the end of the tunnel, and I’m not checking out.”
Scott Ward: [00:36:16] When you don’t have any expectations or any guideposts, then, yes, so easy to check out because you’re just spinning, whatever, whatever. So, get the proper people. I would say, check in with your accountant, check in with your attorneys, check in with a business broker, and interview a couple of different business brokers, and maybe even your personal wealth management people to help you get that side.
Scott Ward: [00:36:47] And with your team, now you’ve built a team to run your business, now you need to build a team to sell your business. So, you get the right people and you ask the right questions and that will help you come up with that proper timeline. And it sounds like a lot, but this could be done in a week. I mean, it really doesn’t take that long to pull that team together because all those people I mentioned, including people like yourself, Ed, want to help.
Scott Ward: [00:37:13] And part of that might even be, you know, you get a coach or a business evaluation person who can come in. And there is so much cash to be squeezed out of everybody’s P&L and balance sheet you don’t even realize. Like in my situation, I now handle leasing for people, just because your lease is not up for three years doesn’t mean you can’t renegotiate it right now and squeeze some cashflow out of that, put it in towards marketing, or whatever it is. Then, promote within the next three years your EBITDA and your cashflow, and suddenly your business valuation has been 1.5 more than what it was. It’s fun.
Ed Mysogland: [00:37:56] Yeah. I’ve wanted to make sure, from a timing standpoint, I meant to get to it earlier. But how does franchises like this fare in recessionary times?
Scott Ward: [00:38:15] They use businesses that does very well. I mean, it does well. And normally everybody wants to save money. The nice thing about any used business or clearance or closeout is to make sure you have a good product mix to answer your target audience, target customer’s need. So, even if you don’t have everything they want, they can at least pick it up new or in some other way. They don’t have to go to another location..
Ed Mysogland: [00:38:46] Okay. So, how do we connect with you?
Scott Ward: [00:38:51] So, I’ve got a website, Scott Ward, scottyward.com. And then, there’s my email address, scottyward4@gmail. The book, you can find on Amazon. It’s under entrepreneurship, franchising. Even, again, you don’t have to have a franchise, I think, to get some fun kicks and giggles out of some of the stories.
Ed Mysogland: [00:39:21] Nice.
Scott Ward: [00:39:22] I use Bobby, Talladega Nights, Bobby, Slingshot.
Ed Mysogland: [00:39:32] Right. Right. Okay. Well, we will make sure that we have all the ways to get in touch with you in the show notes. And thank you so much for the time. I mean, I know your experiences and the work that you currently do as well, the big takeaway, just how you shepherd in employees to not only work for you, but went on into entrepreneurship. And I think that, you know, that is an attestation to you on just the kind of guy you are and the help that you’ve given. So, thanks so much for your time today and I hope you enjoyed it as much as I did.
Scott Ward: [00:40:21] I did. It was a pleasure, Ed. Thank you so much.
Ed Mysogland: [00:40:24] All right. Well, thanks again. We’ll see you around.
Outro: [00:40:29] Thank you for joining us today on the How to Sell Your Business Podcast. If you want more episodes packed with strategies to help sell your business for the maximum value, visit howtosellabusinesspodcast.com for tips and best practices to make your exit life changing. Better yet, subscribe now so you never miss future episodes. This program is copyrighted by Myso, Inc. All rights reserved.
