A Paw-sitive Partnership TEAMING UP WITH INVESTORS FOR GROWTH PG. 8
Get Smart THE SCIENCE OF GOOD CHILDCARE PG. 4
Slice of Pie THREE FRIENDS INVEST IN PIZZA PARLOR PG. 13 A Publication of The Firm Business Brokerage
Fall 2017
ACQUISITION EDITION
Volume 2 Issue 1 Published by The Firm Business Brokerage President/Editor • Cortney Sells Director/Assistant Editor • Cassandra Powers In-House Legal Counsel • Susanne Miller Brokerage Principal • Rene Rademacher Director of Strategic Development • Rachael Rand Broker • Dan Hayes Broker Liason • Makayla Kalagias Logistics • Adam Jaime Portfolio Officer • Maureen Tierney Office Manager • Melinda McGranahan
Contributing Writers • Odee Ingersoll, Sue Miller, Maureen Tierney, Katie Todd, Cassandra Powers Photography by Bill Sitzmann & Sarah Lemke
To Subscribe: The Firm Business Brokerage info@TheFirmB2B.com 210 N. 78th St. Omaha, NE 68114 402.998.5288 Advertising Inquiries: 402.884.2000 todd@omahamagazine.com
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The Firm Deal Review
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A Publication of The Firm Business Brokerage
The Bottom Line
Crete Vet Practice Continues Through Strategic Buyer
Special Section
Features
7 Take Our Hand
Columns
Science Goes 4 AA Little Long Way
The Firm Business Brokerage has
more than $90 million in assets
under management of cash-
Helping Kids Steam Ahead
the Future 8 Funding Continues Through Strategic Investor
flowing businesses for sale— from contracting companies, to professional service businesses, to medical-based practices.
Industry Consolidation 12 The Story of Marcotte Insurance Paesani Come Together 13 in Purchase of Piezano’s
the Value of Your 6 Raise Business Now
Max it for the Future
Bounce U 11 Having Fun is a Key to His Success Looking for Financing? 14 Why an SBA loan may be a good option for your business
Executive Impact 15 Confidentiality is the core of good business
Sells Insights
Growing a Business Can be Tough
T
by Cortney Sells president/editor
here are some paths
that seem like a no-brainer but don’t pan out, and others that unexpectedly lead to rapid growth. Either way, a good strategy involves defined goals and a clear step-by-step process to achieve them. The only remaining question is if it’s better to grow organically or through acquisition?
The short answer is that there are positives and negatives to both approaches, and it really comes down to knowing what you want and what you are willing to do to get what you want.
Growing by acquisition is the fastest way to boost your bottom line. It provides an influx of skilled employees, new customers, and a burst of capital. However, ensuring you have the resources and time to devote to such rapid growth is key. Otherwise, you’ll find yourself in over your head and unable to incorporate successfully. In that case, having the patience to grow slowly and internally is the better option.
sistently seek new and creative ways to achieve our financial goals. Looking to the future is half the battle, but implementation of any growth plan is like getting that last slice of pie that everyone is clamoring for. When acquisition works to your advantage, your bottom line becomes your best friend. The same may be true for an organic approach, but the process could take years. In the end you’ll reach your goal either way. THE FIRM
As business owners, we all want to grow our companies, and as good innovators we conFall 2017
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“AT SMART START WE AIM TO OFFER A BALANCED CURRICULUM WITH A FOCUS IN STEM,” SAYS MCLEAN. “THIS BENEFITS THE CHILD’S LEARNING TRAJECTORY AND HELPS TO SET MEASURABLE GOALS.” - Margertha McLean
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A Publication of The Firm Business Brokerage
A Little Science Goes a Long Way Giving Omaha’s Kids a Smart Start in STEM written by Maureen Tierney
R
emember when you first learned
Former owner Jayne Buck had similar
about the tiny molecules that make up every living plant, animal and substance? It seemed an impossible reality to your young mind, as it’s hard to believe what the eye can’t see. But your teacher, like any good teacher, gave you the tools to observe these minute beings on their terms, and the wonder your eyes beheld through the microscope expanded your understanding of fire, water, and the breath of life. Up to that point, everything unknown was a curiosity that you couldn’t wrap your head around, but with just the smallest nugget of knowledge the world made a little more sense and a spark was lit.
ideas when she bought Smart Start in 2012. What was originally intended to be an investment quickly became a project of passion. “I wanted to provide the same services and activities that my own children had when growing up,” says Buck. On that note, she implemented all-inclusive enrichment activities at no extra charge, reviving a neglected center and boosting enrollment from under 25 children to five times that number. Programs for school-age children were developed, including beforeand after-school care, school transportation, and school break programs with field trips and special activities. Children ages 3 and older are exposed to art, dance, soccer, story time, and more to provide a well-rounded experience. These added programs and enrichment activities have aided the success of the center, and McLean plans to keep them in place.
Margertha McLean, who can’t remember a time when all things science and math didn’t fascinate her, is hoping to plant that same spark in Omaha’s youngest children. As the new owner of Smart Start Learning Center, McLean is putting her training and education to work. She’s spent the past seven years working for two major food companies in a lucrative food scientist and operations manager career, but is taking her degrees in cellular biology, biochemistry, and nutritional sciences to early childhood education. It may seem like science and child care wouldn’t mix, but both fields are not all that different, and McLean would be the first to tell you how children can benefit from a STEM (Science Technology Engineering Mathematics) education foundation at an early age.
While a graduate student at the University of Wisconsin-Madison, McLean was simultaneously involved in research and tutoring in math and science. Working between two different fields gave her a “unique spin on how science fits hand-in-hand with early childhood education.” An early start leads to a better grasp of more than just biology, chemistry, and physics, as it trains children to think and observe in more comprehensive ways. “At Smart Start we aim to offer a balanced curriculum with a focus in STEM,” says McLean. “This benefits the child’s learning trajectory and helps to set measurable goals.”
But it didn’t happen overnight. Buck put in countless hours, developing a curriculum and setting aggressive goals for growth. She focused on creating an “entire experience for parents and children from start to finish.” Buck introduced the emphasis on healthy eating with access to fresh fruits and vegetables, organized the classrooms, and developed the staff to where they are now. She and her husband James “enjoy the process of taking a business, growing it, working on it, and seeing the fruits of labor,” says Buck. With Smart Start, it’s been more than just an entrepreneurial endeavor. The Bucks put in countless hours improving the facility with the Early Learning Guidelines in mind to ensure age-appropriate activities were available. It’s been a work of dedication, where Buck became invested in the well-being of the staff, parents, and children, and it’s this deep care that she sees in McLean.
Like Buck, McLean didn’t set out to become an owner and of a child care facility, but when she became pregnant with her daughter, she began to think about how she could work, spend more time with her daughter, and have an impact on education. Her husband, family,
The Firm Deal Review Reason for Purchase: Owning a business with a purpose Financing: Centris Federal Credit Union Days on the Market: 180 Sale Price: $615,000
and friends were supportive, but not without skepticism. Not only would she be leaving behind a thriving career in corporate America, but she’d be taking on something entirely out of her purview. But this wasn’t done on a whim, and she wasn’t going in without a plan.
Buck already put in place several programs that involve aspects of STEM, but McLean wants to take it even further. With the assistance of her tenured staff, assessment tests will be developed to help meet each child’s individual needs, from toddlers to preschoolers. There is a need for more readiness programs for pre-kindergarten children, and McLean would like to introduce them to robotics and engineering in the form of special building blocks and math brain breaks. Nutrition is equally important, and Smart Start provides healthy meals and snacks to help children gain knowledge of food agriculture and general nutrition.
It’s an ambitious start for McLean, who has already spent her first month meeting most of the parents, getting to know the children, and working with her knowledgeable staff to help in her transition to ownership. “The teachers have lots of experience—over 20 years’ worth—and have been essential in my coming on boarding,” says McLean. Who knows, maybe one day you’ll see other Smart Start Learning Centers in the area, ensuring that Omaha’s children are flourishing and having fun with STEM education. THE FIRM
Fall 2017
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A Publication of The Firm Business Brokerage
Raise the Value of Your Business Now MAX IT FOR THE FUTURE written by Odee Ingersoll, CVA, CEPA, MBPA, EDFP, president and lead analyst at Pinnacle Consulting
W
hen do business owners need to
know the value of their business? The obvious answer is before they sell it, or when events require a valuation. The less apparent answer is whenever they want to grow their business’s value and opportunities.
provement. Raising value over time will increase sale or transition opportunities. If a “value gap” is present—the difference between a firm’s true market value and what an owner wants it to be worth—there’s time to close it.
2. If three years isn’t an option, get started Professionally prepared business valuations are more than just opinions of value. To get there, an analyst must understand the business’s underlying performance and the market it operates in. This requires research and insight beyond three years of tax returns or financial statements. A valuation isn’t just a snapshot in time. Opportunistic owners and buyers understand that it’s really a guide to future success.
now with whatever time is available. There are some steps that can be taken to immediately raise business value, even if a longer-term approach isn’t possible.
3. When a deal is underway, the business may be valued again to support the agreed-to purchase price and required financing. Determining if a credentialed report is required de-
Valuation is both art and science. Each is an irreplaceable element of a professionally prepared report. Software and online products provide rudimentary estimates—that’s the science part; one entry plus another makes a result, often using averages, median values or “rules of thumb.” In reality, few businesses are average. They are unique with a unique business value.
When owners settle for an average, most of the time they settle for a value that’s wrong. What the science part is lacking is the experience to know when to deviate, take an alternative approach, or make a judgement. The science part doesn’t ask “why.” The art part not only wants to know why, but “how” and “what if.” There’s no algorithm to approximate the experience created by working one-on-one with hundreds or thousands of unique businesses. They look at market, economic and demographic trends; competition, technology disruption, and operational structures. What happens outside the numbers can affect real business value by tens of thousands to millions of dollars.
So, when do business owners need to know the real value of their business? 1. Three years in advance of an expected transition is a great place to start. Buyers and lenders will want this historical performance to judge the business. A reliable valuation provides a starting point. It shows what the business does well and demonstrates opportunities for im6
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Fall 2017
THE FIRST STEP TO A MORE PROFITABLE, MORE VALUABLE COMPANY BEGINS WITH A BUSINESS VALUATION THAT PROVIDES OWNERS THE INFORMATION THEY NEED TO PLAN, AND THEN TO ACT. pends on the value of the underlying tangible assets, and more importantly, the proposed value of goodwill or the intangible assets. Increasing the value of goodwill is where real value opportunities lie. While physical assets tend to lose value over time, in a great business, goodwill should grow. Non-compete agreements or some intellectual property assets may add value too.
4. Not all business events are planned. Businesses or owners facing litigation or other significant events need a reliable, fair valuation and a professional who can defend it.
Owners need to pay attention to the valuation approaches and methods used by an analyst.
An asset approach should rarely be used to value a successful business. More often, it is used when other approaches or methods cannot be applied, or to support another value approach. Profitable businesses should be valued using both a market and an income approach, and may include multiple individual methods. The market approach values a business using actual completed transactions of similar businesses based on annual revenue, EBITDA or seller’s discretionary earnings. The income approach uses public risk and investment returns, applying the result to either historical or pro forma financial performance. In each approach, various premiums or adjustments may apply depending on the method used, ownership interest being valued, and the assessment of the analyst.
The first step to a more profitable, more valuable company begins with a business valuation that provides owners the information they need to plan, and then to act.
In Nebraska, Ingersoll provides business valuation services statewide and inside the metro through Nebraska Business Development Center. Additional valuation and litigation support services are available nationwide through Pinnacle Consulting. Phone: 402-671-0401 or 888-858-4548. Email: ingersollo@pinnacleforbusiness.com THE FIRM
A Publication of The Firm Business Brokerage
Take Our Hand: FEATURED OPPORTUNITIES FOR SALE 90 Percent Home and Auto, Farmers Insurance Agency PRICE: $119,000 OWNER PROFIT: $102,000
Home Improvement with Two Locations PRICE: $750,000 OWNER PROFIT: $192,624 Specializing in vinyl window and door installa-
The Lincoln location of this Farmers
tion, the sellers of this franchise business have
Insurance agency has been in operation
locations in Nebraska and Iowa. Together, the
since the 1970s, and has recently moved to
stores gross over 2.4M in sales and profit the
a higher profile spot. Newly remodeled, the 750-sq. ft. office is along a well-traveled
owners nearly $200,000 in cash flow. As part of a nationally-recognized name brand,
highway and leased for $868/month. Over 40 insurance products are available, with
these stores promise huge growth potential coupled with absolutely no franchise fees.
90 percent of sales and renewals coming from home and auto policies.
Nationally-Recognized Donut Shop with Two Locations PRICE: $380,000 OWNER PROFIT: $107,447
Auto Repair & Maintenance in Lincoln PRICE: $319,000 OWNER PROFIT: $102,996 Located in an affluent part of Lincoln, this auto
With two Omaha locations, this national
repair and maintenance business consistently
bakery and donut franchise grosses over
grosses over $700K in sales and boasts 60
$770,000 combined. Each shop is situated
percent repeat clientele. Part of a national
near major intersections and heavy populated areas of town. In operation for 12 and 5
franchise, this location was opened in 2003, and has been under the same ownership
years respectively, the seller is looking to relocate and would like to pass these stores
since. The building measures at 4,500 sq. ft. and includes five bays, a lobby, and an office.
on to dedicated buyers.
Upholstering & Furniture Repair Company
28 Nutrition Supplement Stores Across 9 States
PRICE: $220,000 OWNER PROFIT: $86,942
PRICE: $10,700,000 OWNER PROFIT: $3,058,341
For over 100 years, this furniture upholstering
These health and nutrition stores, with over
and repair company has built a strong repu-
$15M in combined sales, are a leading retailer
tation for old-world craftsmanship. Consid-
in the health and fitness industry. Part of a
ered a recession-proof trade, this business
franchise, there are 28 stores located across
weathered the recent economic downturn with minimal disruption, and has tremendous
nine states. The owners are absentee but have staff in place to manage day-to-day
growth potential. While this is a specialized industry, there are six employees in place
operations, consisting of two-four employees per location, including a manager.
to manage the work.
**Upscale Catering with Consistent Profits
Industrial Printing Grossing 1.5M in Sales
PRICE: $385,000 OWNER PROFIT: $129,437
PRICE: $810,000 OWNER PROFIT: $205,372
For over 30 years, this upscale catering and
In operation since 1989, this business spe-
cocktails business has shown consistent
cializes in the distribution of media tools and
profits. Specializing in elegant and tasteful
has recently purchased a $15,000 flatbed
events from weddings to corporate parties,
press capable of printing on almost any sur-
menus range from breakfast to picnic specials. With both catering and liquor licenses,
face. Owned and operated by the same couple since its inception, this company has seen
the owner has begun offering cocktail-only events without food. This is a great area for
the rise and boom of tech, and continues to innovate and move with industry demands.
growth and promises to be a fantastic revenue earner.
** Broker’s Choice | 110+ Available Business Opportunities For Sale. Please visit TheFirmBusinessBrokerage.com for details Fall 2017
The Firm Deal Review
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A Publication of The Firm Business Brokerage
“I I FOLLOWED MY DREAM AND NEVER REALLY THOUGHT I WOULD BE OWNING MY CLINIC JUST FOUR YEARS OUT OF VET SCHOOL, BUT HERE I AM, ENJOYING EVERY DAY OF IT.” - Amber Andelt
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The Firm Deal Review
Fall 2017
A Publication of The Firm Business Brokerage
Funding the Future How Investors are Helping Shape Animal Clinics written by Maureen Tierney
I
nvestment trends come and go, some-
times leaving an indelible mark on an industry, changing it for producer and consumer alike. Most of us may not know it, but the veterinary industry is rapidly transforming, especially in the Midwest, where many small-town and rural vets are near or past the age of 65. And it’s not as if today’s newly graduated veterinarians are financially able to afford owning and operating a clinic. Schooling isn’t cheap, and neither is the diagnostic equipment needed to run your average vet practice. But that didn’t stop Dr. Amber Andelt from making plans.
“Owning a clinic was something I dreamed of doing from a young age. My parents say I stated I was going to be a veterinarian when I was four years old. I followed my dream and never really thought I would be owning my clinic just four years out of vet school, but here I am, enjoying every day of it,” Andelt says. As the new part-owner and managing partner of Crete Veterinary Clinic, Andelt is learning firsthand the management and business skills needed to run a practice, two areas barely touched in most veterinary programs. However, unlike many of her counterparts, she was able to become an owner with help from an investment group and rollover equity from the selling veterinarian.
Frank Zhang and Jake Sloane are, along with business partners Dan Markenson and Matt Sussman, the founding partners of ZBS Capital and Alliance Animal Health, a multi-site owner, operator and business partner to veterinarians countrywide. The Boston-based companies finance and take a majority-ownership stake in veterinary practices with the goal of providing long-term capital for clinics to grow under the umbrella of a sound network. They are partners in care, ensuring that doctors can fund new equipment purchases, better manage inventory, and assist in an eventual exit strategy on the part of the retiring owner. The company oper-
ates on the principle that a veterinarian knows his or her clinic best, and taking the burden of ownership out of running the practice not only aids in winding down to retirement, but also allows the doctor to do what they do best: treat the animals they love.
“I DIDN’T WANT TO CLOSE DOWN AND WALK AWAY,” SAYS HARDENBURGER. “MY GOAL WAS TO SELL THE PRACTICE TO SOMEONE WANTING TO PROSPER AND BE AN ASSET TO THE COMMUNITY.” - Dr. Phil Hardenburger
When it came time for Dr. Ph Re: Firm Proof Final - MB il Hardenburger to consider retirement, this opportunity was the answer to a solution he’d been seeking for a while. Hardenburger opened Crete Veterinary Clinic in 1975, serving the town’s pets and nearby cattle herds, but when it came to looking for a doctor to continue his practice, he wanted to make sure the person he found was passionate about staying and working in Crete. “I didn’t want to close down and walk away,” Hardenburger says. “My goal was to sell the practice to someone wanting to prosper and be an asset to the community.” Hardenburger had done some research on organizations that buy veterinary clinics, and for a moment he felt he had found one. Unfortunately, the deal fell through at the last minute.
The Firm Deal Review Sale Price: $510,000 Location: Crete, Nebraska Reason for Sale: Retirement Investment Partner: ZBS Capital
Then Hardenburger met The Firm’s Brokerage Principal, Rene Rademacher, at an industry convention where the prospect of selling was revisited and Hardenburger embarked down the road to becoming Zhang, Sussman and Sloane’s next strategic acquisition with the help of The Firm. Now, a strategic acquisition by any other name, is a way of taking advantage of a fragmented market like that of the veterinary industry. Fragmentation refers to a diversified market, where essentially there are no WalMarts influencing the industry, driving down prices, and squeezing out the competition. Animal clinics are generally small operations, with a multitude of them spread across any given area. Services are in-person and unique to each transaction, meaning no two “products” are alike and mass-production is an impossibility. So, partnering with companies within the same industry is a way of rationalizing competition in a fragmented sector. It becomes a supportive network of like-minded businesses with the goal of growth, giving smaller operations greater resources and stability.
Not only would Hardenburger now be able to retire, but a young Dr. Andelt would become an owner of her own vet much sooner than possible, and be the recipient of financial resources for state-of-the-art equipment. “ZBS Capital has been able to offer access to purchasing contracts with distributors and manufacturers on a great scale, offering more savings for the clinic as well as in other areas such as insurance, payroll and credit card processing,” Andelt says.
>
continued on page 10
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A Publication of The Firm Business Brokerage
IT’S A MUTUALLY BENEFICIAL RELATIONSHIP, AND FOR ANDELT, “OWNING THE PRACTICE IS REWARDING. THE MORE HARD WORK AND TIME YOU PUT INTO IT, THE MORE REWARDS YOU GAIN.” >
continued from page 9
It’s That Simple.
The investors maintain a majority partnership in the practice while still giving Andelt sufficient controlling interest, allowing her the added support in decision making while “focusing on providing veterinary services and growing the practice.”
The question that may come to some minds is why focus on the veterinary market for such large investments? Simply stated, the animal industry is ever-growing and lucratively priced, and as long as man’s best friend is furry, there won’t be a drop in demand any time soon. And the Midwest, with its healthy economy and sturdy practices, is a prime market for investment groups to provide capital and assist in growing businesses. But that doesn’t mean that robust vet practices won’t benefit from a partnership with an investor. Andelt is able to map out a fiveyear plan thanks to ZBS Capital. “We have set a goal to have not only one mobile vet truck, but two up and going within three years,” says Dr. Andelt, who also plans to have the large animal facilities remodeled and a “new boarding facility for dogs and cats within five years.”
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For Andelt, Hardenburger, and ZBS Capital, the long-term goal is not to create a standardized one-size-fits-all model, but to continue the growth of a healthy industry while still earning a steady return on investment. Relieving some of the more arduous business decisions from the mind of an owner-operator veterinarian can return their focus to the care of animals large and small. It’s a mutually beneficial relationship, and for Andelt, “owning the practice is rewarding. The more hard work and time you put into it, the more rewards you gain.” THE FIRM 10 The Firm Deal Review
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Bounce U Celebrates Two Years of Growth HAVING FUN IS A KEY TO HIS SUCCESS written by Susanne Miller
“MY WIFE SAYS I COME HOME ENERGIZED AFTER BEING THERE. WHEN THE KIDS COME FOR FIELD TRIPS AND BIRTHDAY PARTIES, YOU CAN SEE THE EXCITEMENT ON THEIR FACES. IT’S REALLY A GREAT THING.” - Jerry Rachwalik
J
erry Rachwalik believes success
and fun are tied closely together. The owner of Bounce U since July 2015, he knows that the total experience for his young clients is crucial for repeat business. “We have seen steady growth over the past two years. Some new business owners want to see a huge jump, but that is hard to sustain in the long run.” Throughout the two years, additional businesses with similar concepts have opened, but Bounce U maintains a consistent level of service that parents receive.
Bounce U is a franchise, so there are operational guidelines that the franchisor has put in place and must be followed. However, there were changes Rachwalik could make to improve things. First, he increased the staff, having two managers on site instead of one to provide more observation and support in the two bounce rooms. The number of attendants at birthday parties increased to two, since there are a lot of details and activities involved with those events. The key was having people who wanted to be there with the kids, not just be there for a job. Feedback and discussions are encouraged so that operations can be continually improved and the employees stay motivated.
Parents also appreciate other additions. Curtains were added to the windows to reduce heat and glare. More toddler items were added to the play area. The next inflatable purchase being considered is one for younger children. “Moms are there with children ages 1-3, so we
need to have something for them, too.” The fact that Rachwalik has toddler grandchildren himself was a big motivation.
It’s also the “little things” that people may not see. A commercial sewing machine was purchased so that the vinyl could be repaired in house. That saves several days—repairs can be made overnight and the inflatable is ready the next morning. Most mechanical issues and equipment maintenance are handled by the owner himself if it doesn’t need to be outsourced. A hands-on business was what he was looking for, but confidence in the staff also means that he doesn’t have to be there all day.
These changes are positive, but there are some things that will not change. Weekends are often booked with parties, so there is a strong commitment to continuing to provide family bounce on Tuesday nights and Parent’s Night Out every other Friday. These things are popular with families, so parties will not be scheduled during those times. This is all part of the focus on what customers want. The goal is to continue to grow and have more inflatables so more kids can bounce; but if there is no opportunity for families to be there together, then that can’t happen.
business he wanted to buy. After not finding what he was looking for in those industries, he decided to change his way of thinking. “When a different type of business was presented, I tried to think about what others were seeing that made them think it was the right fit for me.”
His advice to prospective buyers has stayed the same: be open to the possibilities, because you never know when the right opportunity will come along. When you find it, don’t be afraid to take the next step or it may pass you by. He wouldn’t change the process he went through, even though it took some time to find Bounce U. Looking back, he made the right choice. “My wife says I come home energized after being there. When the kids come for field trips and birthday parties, you can see the excitement on their faces. It’s really a great thing.” THE FIRM
The Firm Deal Review Location: 11144 Q St., Omaha, NE Years Owned: 2 Activities: Birthday parties, open bounce and more Business Plan: Have fun and grow
Bounce U was not the first business he considered; in fact, it took three years to find it. Rachwalik came into the process with what he describes as a narrow focus on the type of Fall 2017
The Firm Deal Review 11
A Publication of The Firm Business Brokerage
Industry Consolidation
The Story of Marcotte Insurance written by Maureen Tierney
from many major providers, and as such can offer reduced premiums and substantially more affordable prices.
How does this benefit Marcotte since ev-
W
hen it comes to planning growth projections, many companies focus on adding more customers or team members to increase earnings and streamline services. What’s often forgotten is the immense benefit of acquisition. While it may seem more cost efficient to expand organically, the long-term financial gain of acquiring a sister company should outpace the growth of internal development. Economists and financial gurus refer to this as industry consolidation. While the term sounds impressive, the process, and theory, is much simpler. The purpose of acquisition is to increase earnings and drive down costs for the buying company. It also works to make for a competitive market.
MANY SMALLER INSURANCE COMPANIES ARE MOVING AWAY FROM HEALTH POLICIES, MOSTLY DUE TO THE RESTRICTIONS AROUND, AND GENERAL UNCERTAINTIES ABOUT, THE AFFORDABLE CARE ACT. Many smaller insurance companies are
There are several fields that practice industry consolidation, most notably the arenas of printing, dentistry, and insurance. Let’s focus on insurance for the moment, and take into account Marcotte Insurance, an Omaha-based powerhouse since 1927. With a myriad of products available and a heavy presence in the local marketplace, it may seem unnecessary for a company of Marcotte’s size to consider acquiring much smaller entities. But, that is exactly what they are doing.
12 The Firm Deal Review
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moving away from health policies, mostly due to the restrictions around, and general uncertainties about, the Affordable Care Act. Property and casualty policies are becoming the bread and butter for these businesses, but most fall under the umbrella of captive providers. An agent for a brand name provider can only offer their provider’s policies, and is therefore limited when it comes to premiums and pricing. Marcotte, who works in the non-captive sector, is an insurance brokerage representing policies
erything seems stacked in the customer’s favor? With offices in Omaha and Kearney, Marcotte is well-known in both cities. The miles in between offer many untapped clients. The policy holders in these areas are more likely to buy insurance from captive entities, or policies with much steeper premiums from non-captive agencies. Customers, due to the lack of options, are essentially in a market desert. Marcotte’s goal is to purchase the independent agencies, and, with their buying power, reduce premiums while gaining a whole new client base. Policyholders keep more money in their pockets, and Marcotte expands its books and income. The marketplace becomes more stabilized and captive agencies are forced to compete.
However, not just any independent agency is a target. There are parameters to determine the ideal candidates:
• $400,000 to $4,000,000 in revenue • A staff of 5 to 15 employees • 2 to 3 years of owner transition • A location along the I-80 corridor between Omaha and Kearney
These resume requirements are the stepping stones to acquisition. It may seem easier to simply lease a small office space and set up shop, but buying an existing agency is an immediate opportunity to reach customers. There is also the added benefit of skilled and trained employees in place, removing the hassle of having to staff an entirely new outfit. As with any endeavor, the weighing of pros and cons should come into play, but far more often than not, the path to acquisition will prove the more worthwhile approach to financial gain. THE FIRM
A Publication of The Firm Business Brokerage
The Secret Sauce of Success Three Friends Join Forces to Own a Lincoln Pizza Parlor written by Maureen Tierney
S
ince 1982, Lincoln has been treated to the homestyle recipes of Dick and Diane Burner’s grandmother. The dough and sauces are guarded secrets, made in traditional ways brought over from Italy, but the atmosphere is a uniquely American twist on the Italian trattoria, with a Midwestern flair thrown into the mix. Where you might expect décor influenced by New York-style pizzerias, you’ll find a modest approach. The focus is on the food and the family spirit, which is really what Italian food is all about.
HONKE AND RILEY KNEW THEN THAT THIS WAS THE PERFECT RESTAURANT TO INVEST IN. IF QUINTERO LOVED AND TRUSTED IT, THEY WOULD TRUST HIM TO RUN IT. What drew Piezano’s new owners to the restaurant was a chance to participate in a Lincoln tradition. As young men in the Phi Kappa Theta fraternity at the University of Nebraska-Lincoln, Colby Honke, Ryan Riley and Matt Quintero could hardly know that they would one day own stake in a family restaurant. For Riley and Honke, Piezano’s was the first stepping stone on their long path of entrepreneurship. For Quintero, someone who loves few things more than pizza, the dream of owning his own restaurant became a delightful reality.
While all that sounds like a “happily ever after,” the road to owning Piezano’s has not been easy for these three. They began looking for an opportunity long before they were aware
Piezano’s was for sale. “We would check out other listings, but we never found that fit,” Honke says. It was when The Firm’s Brokerage Principal Rene Rademacher mentioned the Piezano’s opportunity that Honke and Riley had their lightbulb moment.
“We contacted Matt [Quintero], who just a couple of days before had mentioned that if he were to open a restaurant, he would want one just like Piezano’s,” Honke says. Quintero, who had worked as a server and assistant general manager at another Lincoln favorite, had grown to love Piezano’s over a summer-long experience. Each week, Quintero and a group of pizza lovers went on a “Pizza Walkabout” and tasted the menus of Lincoln pizzerias to experience the local flavor. Honke and Riley knew then that this was the perfect restaurant to invest in. If Quintero loved and trusted it, they would trust him to run it.
Riley and Honke, who plan to expand their investment portfolio for years to come, are part of an entrepreneurial community “of creative types with a variety of different products.” Many of their friends are “doing entrepreneurial things,” and investing in a restaurant is a learning experience that gets their creative juices flowing. The three pals spend around 15 to 20 hours each week discussing the back office operations of Piezano’s, dreaming up how to imprint their mark on the restaurant without erasing the identity of the restaurant. “Piezano’s is a 35-year-old Lincoln tradition, and we don’t want to mess with that,” Honke says.
When Honke and Riley asked Quintero to join them in owning a restaurant, they wanted to “work in a restaurant with generations of customers who love the food and atmosphere,” and that’s exactly what Piezano’s delivers. Quintero’s love of the place and years in the industry give him an expertise that has made their transition all the easier. They’ve also benefited from the fact that everything is already in place and runs like clockwork. On the day the three officially became the new owners, “Piezano’s
opened at 11 o’clock and we met at 5 p.m. to introduce ourselves to the staff,” Honke says. It also helped that previous owner Greg Friesen was on hand for the first few weeks to ease the staff into working with their new management. The three agreed to not change much right away, but they do plan on increasing lunch hours and adding breadsticks to the menu.
In the end, Piezano’s seems to have become a home for three young men who are “exceptionally proud to own something with a rich history.” Passion is a large part of a good investment for Honke, Riley, and Quintero, which makes it worth their while. Much like the Italian recipes that differentiate Piezano’s from the cookie-cutter options out there, the journey and tradition of a place is important to the success it sees down the road. THE FIRM
The Firm Deal Review Reason for Purchase: Investment Financing: First National Bank Days on the Market: 93 Buyers: Three Fraternity Brothers
Fall 2017
The Firm Deal Review 13
A Publication of The Firm Business Brokerage
Looking for Financing? WHY AN SBA LOAN MAY BE A GOOD OPTION FOR YOUR BUSINESS written by Katie Todd, senior business relationship manager, Wells Fargo
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recent survey by Wells Fargo shows small business owners have more optimism and confidence today than at any point in the last 10 years. The increase in optimism was driven in part by how business owners rated their current financial situation, and their expectations that their finances, business revenue, and cash flow will improve in the next 12 months.
A RECENT SURVEY BY WELLS FARGO SHOWS SMALL BUSINESS OWNERS HAVE MORE OPTIMISM AND CONFIDENCE TODAY THAN AT ANY POINT IN THE LAST 10 YEARS. - Katie Todd, senior business relationship manager, Wells Fargo
Business Administration (SBA), which does not directly make loans, provides a guarantee for SBA loans made to small businesses by banks and other lending institutions. Because the SBA guarantees a portion of the 7(a) and 504 loans, SBA lenders are able to offer an alternative to creditworthy businesses that may not be able to obtain conventional bank financing.
BASIC USES If you apply for, and are awarded, a 7(a) loan, you can use the loan proceeds to help finance a large variety of business purposes. Typical uses of a 7(a) loan, which has a maximum amount of $5 million, include the following:
• To assist in the acquisition, operation, or expansion of an existing business
• To establish a new business or assist in the acquisition, operation, or expansion of an existing business
• To refinance existing business debt, under certain conditions
ADVANTAGES The 7(a) loan program offers businesses As business owners see an improving economy in 2017, some may seek credit to support the expansion of their businesses. How does an SBA loan fit into the mix of financing choices for small businesses?
Small business owners today have a range of financing options to consider for their specific needs, including conventional business term loans and government-guaranteed term loans. If a small business needs funds for a real estate purchase and expansion, or to acquire another business and manage cash flow, the SBA 7(a) term loan is a great option to consider.
Here are a few quick facts on SBA 7(a) loan programs, and what type of business should consider pursuing this financing.
WHY THE SBA LOAN PROGRAMS? This year, thousands of America’s 28 million small business owners will turn to the SBA 7(a) and 504 programs for financing. The U.S. Small
14 The Firm Deal Review
Fall 2017
immediate and long-term benefits. Some of the benefits include longer terms and lower down payments, compared to other types of business financing. With longer terms, business owners typically have lower monthly payments, which allow them to retain working capital and maximize cash flow.
TERMS
Depending on the transaction type, lenders may also ask for a comprehensive business plan that clearly states the goals and objectives for the business, as well as information about your experience and management capabilities. Wells Fargo Bank can give specific support in preparing or updating a business plan.
THE BEST WAY TO K NOW IF AN SBA LOAN IS THE R IGHT OP TION FOR YOUR BUSINESS IS TO TALK W ITH YOUR BANK ER. - Katie Todd
According to statistics compiled by the U.S. SBA, approximately 95 percent of all small businesses are eligible for SBA financing. To ensure the success of an SBA loan request, a business owner should look for a bank that is part of the SBA “preferred lenders program” (PLP), as PLP providers have been delegated by the SBA for loan approvals, closing, and servicing authority. As experts in the field, SBA loan officers at banks have the knowledge and experience to streamline the application process and can determine the best program for your needs.
The best way to know if an SBA loan is the right option for your business is to talk with your banker. A full-service provider of financial services can you help you evaluate all of your financing options, including SBA loan products, and provide guidance to help your company achieve new levels of success. In an improving economy, creditworthy small businesses have the opportunity to secure a great loan product with excellent terms, and use the financing to help make 2017 the launching pad for future success. THE FIRM
A Publication of The Firm Business Brokerage
Executive Impact CONFIDENTIALITY IS THE CORE OF GOOD BUSINESS written by Susanne Miller, in-house legal counsel
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n today’s electronic world, there is more information readily available to the public. While transparency can be useful in some instances, when it comes to selling a business, letting too many people know about the sale can have a negative impact on the continuing operation of the business.
ONE OF THE CORE VALUES OF THE FIRM BUSINESS BROKERAGE IS “ALWAYS CONFIDENTIAL.” THIS IS NOT JUST A CATCHPHRASE; THIS IS A NECESSARY WAY OF DOING BUSINESS.
When privately placing a business, generic information is used unless a seller specifically gives approval to use the business name or other identifying information. Private placement activities are conducted to attract prospective purchasers, not to let the world know that the business is for sale. Until a qualified buyer has met with The Firm and signed a release, identifying business information will not be provided. The Firm takes it a step further and safeguards certain information, such as data about customers and employees, until a contingent offer to purchase has been submitted and accepted.
- Susanne Miller, in-house legal counsel at The Firm
Why do we have such procedures in place? Because a seller can have a great deal at stake when they list a business for sale, and during the process the business must continue to operate. Consider these possibilities:
• Employees learn that the business is for sale and leave their positions.
• Customers learn that the business is for sale and take their business elsewhere.
• Customers take business elsewhere not
• Competitors learn that the business is
knowing the level of service they will receive under a new owner.
for sale and actively target both employees and customers.
• Competitors use the transfer of ownership
All these scenarios mean that the business
to their advantage by playing on the “unknown” future of the business.
will suffer, making a sale more difficult.
These are the same stakeholders that the The seller is not the only person who has an interest in keeping things confidential. A buyer may want to purchase a business for different reasons, such as a new career, the expansion of an existing business, or achieving a life-long goal. Again, there are several possibilities to consider:
seller is concerned about. In this case, however, the buyer looks at the long-term value of their purchase versus the value under current operations. Either way, the outcome on the current and continuing operations of the business can be substantial.
If it is so important to keep things confidential, • An employer finds out that you plan on leaving and there is no firm exit plan in place.
• Employees move on to another opportunity because they like the status quo.
how does the information get out? Sometimes a business owner or potential buyer wants to tell others about the plan so that they get the information directly from the source. In other cases, a person “in the know” lets it slip in con-
versation. Rarely does it come from the broker, as there are so many safeguards, including the standard use of confidentiality agreements and stringent buyer qualification processes, in place.
One of the core values of The Firm Business Brokerage is “always confidential.” This is not just a catchphrase; this is a necessary way of doing business. When meeting with a prospective seller or buyer, this topic is discussed in detail and a confidentiality agreement between the parties is signed before any further discussion occurs. This is the first step in building trust, and one that our clients expect and deserve. The formation of the business relationship can only exist if it is based on trust between parties. If a seller or buyer does not trust the broker, or they don’t trust each other, then the relationship will not be beneficial and the ultimate goal—the sale or purchase of the business—may never be reached. THE FIRM Fall 2017
The Firm Deal Review 15
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