I love business. I love being in business, starting businesses, running businesses, selling businesses and, more than anything, working with business owners. In fact, I love business so much that for many years, I had a disease that consumed my every waking moment in life. It was probably a disease you have never heard of. It was called “Dealitus.”
When I had this disease, it would not allow me to pass up a deal. When I came upon a business I found interesting and liked, I would buy it. It really didn’t matter what kind of business it was, because if it looked interesting to me and I could get the money or work the financing out with the seller, I would buy the business. During the years of having “Dealitus,” I bought a TV station, radio station, convenience store, motel, ladies clothing store, real estate companies, manufacturing, liquor store, video stores, restaurants, 10 national franchises, and this didn’t count the businesses I started. Overall, I ended up owning and operating more than 40 different businesses.
One business I built up to more than 150 retail units throughout the United States and into Canada before I did an IPO and took the company public. I ran the gambit from small mom-and-pop businesses, to being a major player and being on the stock market. And it wasn’t until I learned to focus, and when a vendor of mine told me the secret to how to make my businesses more successful, did I see the light.
What I discovered was that I was not that good at operating a business. Sure, I made a lot of money with all the businesses I owned. But I also lost a lot of money learning how to find a good business, acquire a business, take care of the business, and manage the business so that it will grow and be prosperous.
This is what I want to share with you: how increase the value of your business and continue to make it more valuable for you and your family.
The secret I am going to share with you is really not a secret at all. It is more common sense than anything but, as Mark Twain said, “The thing about common sense is that it is not very common.”
Unless you have had the opportunity to experience all the different things that can happen and go wrong with a business, you will probably get blindsided, not know what to do, and end up being reactive — therefore costing you time and money.
When I give presentations to business owners, I like to talk about their businesses. If you have ever had to fill out a financial statement (and anyone who has ever went to a bank to ask for a loan will know what I am talking about), chances are the biggest financial asset you have on your statement will be your business. And if you fill out a financial statement on an annual basis, you should be looking at how your business is doing. Is it becoming worth more or is decreasing in value? How has the business value been trending from year to year? Are you growing each year or are you up and down in what you think the value of the business is?
Chances are, you are not paying as close of attention to the value of your business as you should be. I know I didn’t because I was spending a lot of my time looking for new sites, finding new products to sell, addressing HR issues, having to contend with new government regulations that were being implemented to my industry, dealing with insurance quotes and claims. The list is endless.
If you own multiple locations as I did, it just makes matters worse because your time and attention is always drawn to the weakest link, or the biggest problem of the day.
So, what was the secret my vendor shared with me?
One day when I was talking with my vendor, he asked me what I was doing. I told him I had some stores that were terrible on sales and I was working to fix the situation. He didn’t hold back and came right out and said, “Terry you have everything ass backwards!” He said you know how to build and operate a successful business because some of your stores are great stores and they throw off a lot of cash, but instead you are down in the cheap seats messing around with these underperforming stores. He said instead of trying to make your bad stores good, you should be working on making your good stores great.
There it was. A statement that was so simple, yet so profound that it literally changed how I ran my business going forward. Instead of wasting time on a store that was not one of my best stores, as I had done in the past, I began investing my time focusing on my good stores, doing all the things I could do to make them better and more profitable.
I would enhance the building, hire better employees, experimented with adding new products, different signage, more point-of-purchase material in-store, and worked on suggestive selling. I visited my competitors who were operating successful stores to see what I could learn from them. I did everything I could think of to make my good stores great. And you know what? It worked.
You are now probably going to ask: What did you do with the stores that were not your good stores? I did everything in my power to get rid of them. I would turn them into franchisees (or in the case of convenience stores, dealers), I would sell them. I would renegotiate a lease with a landlord to get my rent down. And some of them I closed. Because as they say, “When you are in a hole and want to get out of the hole, quit digging.”
Remember, we are talking about your business and making your business more valuable. We want your business to be worth more every year when you fill out the new financial statement. We can’t increase the value of your business if we continue to operate and keep underperforming stores. It just won’t work.
You can argue all you want about it, but it won’t work. I have heard every reason in the world as to why a business owner wants to keep an underperforming store and none of them are very good reasons.
Some of the reasons I have heard are:
- The stores contribute to the corporate overhead. (So, I hang on to a breakeven store? I was taught that breaking even is for chumps. We are in business to make money, not break even.)
- They help me keep a competitor out. (OK, we think if we get rid of a bad store, our competitor is going to come behind us and make the location great? If that is the case, then why don’t we make the store great if it is such a good location?)
- I need the gallons to maintain my quota. (Go make your good stores great and you will get the gallons you need.)
- I like my employees and don’t want them to be without a job. (Who is running the show? You or your employees?)
- The store has sentimental value. (Yes, it was the first store your family built, but when it was built, it wasn’t on a one-way street. If Dad was alive, he would close the store.)
The reason I am so tough on getting rid of underperforming stores is that I have been there and made the same mistake of justifying why I should keep such a store when it is not in the best interest financially to do so. Underperforming stores are liabilities. They open us up to lots of bad exposure we don’t need when we are working to build a strong and profitable company for ourselves and our family.
When you have underperforming stores, you open yourself and your company up to potential claims and lawsuits from employees and customers for all sorts of things that can go wrong in the store, whether they be labor issues, thefts, environmental issues, or slip and falls.
Underperforming store employees will generally have low morale. Who wants to work at a store that is not making any money or barely any money? The employees know it and it is generally reflected in their attitude toward the customers.
Do you have your best managers at the underperforming stores? No, of course not. You are going to put your best people at your best stores.
Most of all, underperforming stores are a distraction. They distract us from what we do best and that is own and operate profitable and successful stores, which is why we got into business in the first place. We didn’t get into business to lose money or break even. No, our goal is to strive to be the best we can possibly be and convey this message to everyone we come into contact with in our organization.
It has become my goal over the years to do my best to help business owners, such as the owners of convenience stores, not make the same mistakes I did, so they will be more profitable and not have to endure some of the grief I did through bad decisions and ignorance.
My point is: Your business is probably the biggest asset you have on your financial statement and you should pay attention to it, nurture it and treat it with the respect it deserves — not take it for granted — because things can change in a flash.
A lot of the businesses I have owned in the past are no longer in existence or, if they are in existence, they are not very profitable. However, the convenience store industry has what we call “long legs,” meaning it is a great business model and will be around for a long time.
I hope you continue to enjoy the ride and continue to work to make your good stores great, and enjoy the success of owning your own business.
Terry Monroe is the president and founder of American Business Brokers & Advisors. He is also the author of "The Art of Buying and Selling a Convenience Store" and “Cashing In on the Hidden Wealth of Your Business.” He serves as an advisor, consultant, speaker, professional intermediary, and market maker for privately held companies, and assists in market valuations, Monroe has been involved in the sale of more than 500 businesses. He can be contacted at www.TerryMonroe.com.
Editor’s note: The opinions expressed in this column are the author’s. They do not necessarily reflect the views of Convenience Store News.