It’s one thing to consider selling your business. It’s another thing to actually do it. On this edition of “Deal Talk,” Jeff Allen meets with Dr. Harry Freedman, who talks candidly about his experience of selling his business—a successful franchise quick oil change shop. Dr. Freedman discusses some of the anxiety he had during the process along with what he believes was the key to a smooth transaction. You’ll also learn about the team that Dr. Freedman worked with every step of the way. This show provides a fascinating first-hand account of selling a business, and is particularly valuable if you are considering selling a business for the first time.
“If it wasn't for Morgan & Westfield, trying to deal with lawyers and business transfers can be quite costly, quite time-consuming."
- Dr. Harry M. Freedman
Jeff: Welcome to the Morgan & Westfield podcast. I'm Jeff Allen. If you're selling or buying a business or just interested in the subject, then this is the place to be. Our mission is to educate and inform you with the help of some of the most credible, highly regarded experts in the industry of transacting businesses so, you'll be better equipped to make some very important decisions when the time comes to sell your business, or to buy one for that matter.
Now, on this edition of our program, we're going to be talking to someone who has the experience of having sold his own business. We're speaking today with Dr. Harry Freedman. Dr. Freedman recently sold his business, and actually worked through Morgan & Westfield to do that. We wanted to catch up with him today to get some ideas and some thoughts from Dr. Freedman having been, kind of, first-hand involved in the process of selling his business.
Dr. Freedman, I'd like to welcome you to our program. Thanks so much for agreeing to join us today.
Harry: Right. Sure.
Jeff: Dr. Freedman, before we begin talking about your experience with having sold your business, I'd like to give our listeners some background on what you've done in your career. Tell us a little bit about what you are a doctor of and your professional background.
Harry: Well, my professional background I was trained as a [an] orthopedic surgeon, and I went into practice right out of my training in 1978. I started out from a sideline business with a managing partner, and we opened by a quick lube or oil change, convenient oil change as it's called now, in 1988. Just prior to opening the store, the person to be the managing partner moved away so, I ran this business for well over 25 years, although it was not on a day-to-day business. I did all the book keeping and disbursements and payroll outside.
Jeff: And this is while at the same time you're, of course, operating on patients as an orthopedic surgeon and you really did have your hands full, didn't you?
Harry: I did some real estate development as well. [Laughter] Yes, I got busy. I decided to retire at the ripe old age of 65.
Jeff: Well, I think you earned it.
Harry: [Laughter] I do. There were some health issues along the way and my wife who actually did the bookkeeping at home was getting tired and we decided to just simplify our lives.
Jeff: Well, I can understand why, so you can enjoy the golden years and do that unencumbered. Tell me, the quick lube service that you had, this was a franchise, is that right?
Harry: Yes. We had the expertise guidance of a franchisor, and when I went in to the business, there's always one large one, a Jiffy Lube that everybody knows, and there was a smaller franchisor who we went with, there was a Jiffy Lube in town, and I used their business model to decide that we needed a second quick lube in town.
Jeff: And did you enjoy some success during that period of time? I mean, you were in business for quite some time, so I would imagine it thrived.
Harry: Actually, we were profitable from day one and we paid off all the bank loans and exercised the option to purchase the property for about, I would say, 10 to 15 years. We were debt free, which in the business world, I think that was rare. We had a good manager and we had the demographics and profit was there, and the business did well for being an option to the owner.
When I retired from medical practice, I continued being a landlord for the business that I owned, as well as a little more time to the quick lube. Never on site, just doing some micro-management and meeting with the manager, his assistant manager. We advised them, we were thinking of selling the business and gave them every opportunity to purchase it themselves.
The reason to sell the business is we wanted to travel and spend our winters in the south; although we, for several years, actually just did things from the other side of the country. It was working out, but when the manager and assistant manager decide that they didn't want to be owners themselves, we started to formally market the business.
It’s just so important to have accurate records.
Jeff: And so you decided at that point you would go ahead and step outside and find someone who was willing to buy the company from the outside. Tell us about the process. Who did you contact and how long did it take to actually sell your company?
Harry: I contacted Morgan & Westfield. Actually, they were referred by an agency called Score.
Jeff: Ah, yes. They work with business people to help them manage and start their own businesses and also work with those people who are in business, who are looking for ways to kind of move on.
Harry: Their main objective is to increase productivity and keep businesses, especially small businesses, up to snuff with the social media and marketing techniques. They're seminars are just invaluable and they're free. In my case, they helped me evaluate the business.
Jeff: In what role did Morgan & Westfield play? Did they provide full service for you? Tell me about your interaction with them in the beginning.
Harry: Morgan & Westfield, they have a very valuable downloads to people working to sell their business or acquire business and they have a whole reference library available for download for you to do your own evaluations and your own marketing. Of course, that's what they do and when I contacted Morgan & Westfield, they first provided a realistic evaluation of the business.
We went and had a formal appraisal of the real estate as well so that we could market the business with the real estate, or with the lease on the property. What Morgan & Westfield did is they analyzed all the data which was very important to have, not only to value your property and come up with a price, but also to support that number with buyers; it’s just so important to have accurate records.
Jeff: Obviously, it sounds to me like, Dr. Freedman, that you were, throughout the entire time that you owned that quick-lube franchise business, that you had, you were able to pay very, very strict and close attention to all the comings and goings and the numbers and keeping all those records that you had to keep in order to operate that business profitably, and without debt, and that was probably very, very important in helping Morgan & Westfield essentially help you when you take into consideration the bookkeeping that went on, the valuation that they were able to help perform, and the appraising of your business. All of these tied together was extremely helpful. Did you find that, because of all of these, that the process was smoother than you thought it probably would be?
Harry: Morgan & Westfield was able to ask for exactly what records they needed to evaluate the business with the market place. And between my tax records from our accountant and the computer records from the business along with our accounting software, Morgan & Westfield was able to validate all those numbers and when it came time to negotiate with a buyer, we had more ammunition.
Morgan & Westfield was able to ask for exactly what records they needed to evaluate the business with the market place.
Jeff: Now having said that, were you able to get the price that you were asking for, or at least close?
Harry: We did. We offered the business with the property, all with the option and a lease, and the value of the business was exactly what we wanted. The take home point is you have to have clean records and if it's a family-owned business where you have multiple family members with unrealistic payrolls and this and that, it's going to be hard for the buyer to swallow.
Jeff: Did you find that the process of sitting down and talking with the people in Morgan & Westfield, just the process in general, was there anything that caused you some anxious moments? Did you find it particularly stressful or maybe no more stressful than it would be selling a home, for example?
Harry: It was not very stressful at all because once the hardest part was coming up with the right number and the number that was competitive in the market place. And their number was right. Once we marketed it, we had several inquiries - three or four serious lookers. The person that eventually bought it, said that this is exactly what I'm looking for and from that point, it took six-seven months. Of course, if it's a franchise, then the franchisor has to get involved to transfer the franchise to the buyer.
Jeff: Obviously, there's kind of an approval and a vetting process, I would imagine, that is required because there is a franchisor involved and they want to make sure that the person who is coming in to take over is going to have a pretty good chance to do the things with that business that you did.
Harry: Yes. The franchisors want the new owner to follow the expertise of the franchise because, they're going to represent a successful franchise so, that requires going to their training center, become trained in the ways of the franchise. Some franchises only allow owner-operators to run the stores, but mine did not.
Jeff: By the way, if you're just listening in, just so that you know we're talking with Dr. Harry Freedman. Dr. Freedman, within the last couple of years, sold a business, actually a quick-lube and oil franchise business in eastern United States, the east coast.
Dr. Freedman is also an orthopedic surgeon, and he has dealt in other businesses as well. We're talking to him about his experience- having sold his own business - what that was like for him and all the inner workings, the process that went on and his experience, just in general on that.
Dr. Freedman, was there something that occurred at any time, was there anything that didn't go as smoothly as you would [have] planned, or maybe a bump in the road that you weren't quite expecting to hit? Anything at all that you'd be willing to share?
Harry: I thought it went fairly smooth. We got settled simply with faxes and emails and Escrow agents. The biggest anxiety is that you're wondering: after all the time you put in to marketing and selling, whether the deal's going to actually go through. There are some points along the way where you are pretty confident, where the sale won’t be completed, but in the worst case scenario, it doesn't and you have to start all over again.
In our case, the buyer knew what he wanted and got the price that he wanted to pay, and what we were asking. If it wasn't for Morgan & Westfield, trying to deal with lawyers and business transfers, that can be quite costly, quite time consuming. Sometimes the deals don't get done because of the attitude of your experts.
There are some points along the way where you are pretty confident, where the sale won’t be completed, but in the worst case scenario, it doesn't and you have to start all over again.
Jeff: So, having said that, Dr. Freedman, what kind of advice would you give to someone who might be contemplating the sale of their business, whether they want to go into retirement or otherwise?
Harry: Well, if you have a family business, you're mostly wasting your time, if you have been cooking the books, that's going to be discovered and you're wasting your time. But if you're selling a business and it’s under distress for whatever reason, I wouldn't hesitate to use the expertise of Morgan & Westfield because they make it look so easy [Laughter]…
You wonder, how they do it. I mean, everything is put on spreadsheet, and that just explains so easily. If the buyer has any questions, they can check the numbers and if everything jives, that's the important thing. If all the numbers can be validated and explained; Morgan & Westfield can do that for the buyer, and I think that they were very comfortable with Morgan & Westfield as the seller's representative.
Jeff: Well, very, very good. Dr. Freedman, I want to thank you so much for agreeing to join us once again today and wish you a lot of luck, you and your family and your retirement. If the time comes for you to go out and look into another avenue or business venture that you want to get involved in, good luck to that, too.
Harry: Well, I don't think…I think at this point, I just want to enjoy the grandkids and the wife. [Laughter]
Jeff: [Laughter] I think you've earned it.
Harry: The simpler, the better.
If it wasn't for Morgan & Westfield, trying to deal with lawyers and business transfers, that can be quite costly, quite time consuming.
Jeff: Very good. Again, Dr. Freedman, all of our thanks. And we want to thank him for joining us today on the Morgan & Westfield podcast presented by Morgan & Westfield, nationwide leader in business sales and appraisals.
If you'd like more information about buying or selling a business, call Morgan & Westfield at 888-693-7834 or visit morganandwestfield.com. Until the next time! My name is Jeff Allen. Thanks so much again for joining us.