Jeff: Welcome to Deal Talk brought to you by Morgan & Westfield, I'm Jeff Allen. If you're a business owner, entrepreneur, or investor 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, and some business owners by the way have them on as well, so that you'll be equipped with the knowledge to help you make some important decisions when the time comes to sell your business or to buy one.
You may indeed be enjoying success as a business owner right now, whether you've owned your business for a year, or a quarter century, or a hundred years. It's a family-run business, you've had it for generations. But what happens when it's over, when you can't do it anymore, when you don't want to do it anymore, what are you going to do? Retire to the golf course, let your brother take over? What are you going to do with your business, and how much thought have you given to that idea? My guest on this edition of Deal Talk has some thoughts about that. His name is Gregg Sharp and he's a successful serial entrepreneur and business owner in San Diego, California. In fact, he owns multiple businesses in San Diego, don't you Gregg?
Gregg: Yes, I do Jeff. I appreciate you having me on here today. San Diego is the place to own a business for sure.
Jeff: I've had a chance to look in Gregg, and thank you for being on the show, at your profile on LinkedIn and we've got to know each other just a little bit from having talked on the phone before the program today, before we started the process. I was hoping that you might be able to share just a little bit about you, kind of your background and about some of the businesses that you currently own.
Gregg: I appreciate that Jeff. I'm glad to be on. Absolutely, I've been out here in San Diego since 2002. Currently, I own a few different corporations. One, being an entertainment company called A2M Entertainment, which is the parent company to two entities. One is Xplode Fight Series which is an MMA Company we joined here in the California area. The second underneath A2M Entertainment is my magazine called Collateral Damage MMA which is a quarterly publication that we do out here basically on combat sports, that being one of the main entities that I own. The second thing, A2M Contractors, they're a government contractor. I've been doing business in the world of construction and contracting for a little over a decade, which has been extremely successful for me. And I own another company called Escondido Sports and Fitness, which was the parent company to three different gyms here in the San Diego area, which right now is in a co-op situation, which ironically enough is the exit strategy for me and for that gym. San Diego, California has been every good to me. I have no complaints at all.
Jeff: It certainly seems like it completely flies in the face of the old adage, do one thing and do it well. If there's one thing that you've done well it's obviously own businesses Gregg. But you don't do any one thing at a time. What's the mindset there Gregg? I'm just kind of interested, as someone who owns his own business and I do, what is the mindset of a serial entrepreneur, from the time that you got out of college and started your work a day world, your career. What's the thinking there? Was this something that you wanted all along, you wanted to be involved in some different things but you couldn't stand in one place for a prolonged period of time? How does that all work, for those of us who are perfectly content to own our little mom and pop shop here and be good with that?
Gregg: I think it's the challenge Jeff. I got out of college, I was studying Chemistry and Economics back then in the late 80's, early 90's at Cornell. As I matriculated through I found myself less and less likely to put on a suit and tie and more and more likely to just kind of be out in the world of business and making things happen. I think that part of that whole need for the deal, the process, the growth came from an early start. There is the attitude. Do one thing and do it well. And that holds true for a lot of businesses. For someone who is good at making deals happen, someone who is good at restructuring businesses, and making them profitable, and being able to create an asset value. I found myself in a position that owning a single business was somewhat limiting to this. I took on the challenges of opening and operating, buying and selling multiple businesses so that there's always a constant level of excitement and pressure, if you will, to do a job well done and to build value.
As I matriculated through I found myself less and less likely to put on a suit and tie and more and more likely to just kind of be out in the world of business and making things happen.
Jeff: How do you start to think about selling a business Gregg? You start one up. All businesses start as start-ups and there are grand plans. Obviously, there's a lot of work involved in setting the foundation for a brand new business. But at what point do you start to think about selling that business when you've built this thing, or you're in the process of building this thing to be something that's a profitable venture for you?
Gregg: I look at selling my business from the day I buy it.
Gregg: Yeah, I don't ever look at a business as a long-term opportunity per se because values, markets, trends all change. And when you look at a business, in my opinion, you're not looking at a business to make the first dollar in day one, you're looking at a business to be able to exit on a profitable high-end. If I can't see an exit strategy in a business prior to buying it, then I'm not going to buy the business. There's no value to me there. I think that's where a lot of entrepreneurs find themselves in trouble is that they evaluate a business, they look at it, and they say, "Wow, this is a great business." But they don't look at it and say, "If I'm buying that business and cost X, will my business be a cost X+Y exit strategy for me? Or will that business be and “X minus Y” exit strategy for me?" If it's X=X or X-Y then I have no interest in it because there's no value in the end. That's how I go about evaluating the businesses that I take on.
Jeff: Let's talk about it. What are some of the key indicators, some of the criteria that you look for? Is it pretty much the same for every business you take a look at? Are some of the indicators right in front of your face or do they vary really just depending on the business and industry?
Gregg: I think all of the above. When you look at any business, there's multiple types of businesses out there, certainly retail business is the highest form of entrepreneurial spirit in my mind. Everyone wants to sell their product that they make or some clothes, or product to the public it means you're offering something in a retail setting. But there are businesses that are based upon intellectual property. There are businesses based upon manufacturing, or a business made based upon financial bearing. When you look at a business, you're going to look at what are the key elements of why that business is either successful or failing. And if the business is successful in looking at those key elements can you make an improvement to that success? Because every business that's owned individually is based upon that relationship between the owner and his clients. So if you're coming into a business that is highly successful, because Jeff Allen has built that success with his colleagues. You cannot assume that you as an individual purchasing that business entirely would be as successful because you're not the same person. On the flip side of that coin, when you buy a business that is being operated highly and efficiently and is in the red. You have to look at that business and say can I make a change in this business to put into the black. And then once I put it to black and I build enough asset value to be able to sell it, or whenever I purchase it for plus a reasonable profit. So there's a lot of factors that go into looking at a business and it's just not a cookie cutter, if you put in A1 in an Excel spreadsheet you go all the way down to Z1 and hit the sum up button that's going to come up with a yay or a neigh.
Every business that's owned individually is based upon that relationship between the owner and his clients.
Jeff: It's a good point. The reason I kind of brought that up I thought that you would probably be able to give some of those folks who own businesses and listening to this program right now some ideas about where they could look in their own businesses to help them add value. And we're going to talk about that here in just a second. In fact we could probably go ahead and go into it right now Gregg. I'm talking with Gregg Sharp by the way. Gregg is in San Diego. That's where he lives and works, owns three businesses there. He is a serial entrepreneur and someone with a lot of experience having sold his own businesses in the past. We're talking with him today on Deal Talk and we're glad that you could be with us too and be part of your day.
Gregg, the secret formula is what? All businesses are different of course and you touched on that yourself. But revenue aside for the moment, how do you start the process of adding value to your business? Something that could really in fact create an enduring impact on your company's worth. Any ideas on that or suggestions?
Gregg: That's a great question. To add value to a company you have to first determine what your value is. A lot of companies bring value to the table in many forms, some forms of intellectual properties, some forms of assets, some forms are philanthropic in nature. If you look at building value to an intellectual property, and I'll kind of hit on that really quick. If you build value in intellectual property, a lot of folks out there do have a few patents and two or three registering trademarks, and building a great website, and social media practice; those are all great ways to build up value. However, those values are not really tangible. So you're really building what many would call goodwill or value to a business in which it's hard to equate in actual dollar and cents to it. Does a website with a million hits per month have a greater value than a website that has 200,000 hits? Absolutely. But where are your hits coming from, and really what are those hits generated for you will determine some of the value that you're adding to that intellectual side, that social media side. That's a great way to add value to your business without a doubt.
It doesn't necessarily translate out though to the dollars in which you put in, in terms of effort and expect versus what maybe someone will pay in an end game. That's why a lot of people will build up asset value. An asset value to me are hard assets, things that are actually quantifiable, things that you can put out on a concrete platform and say that is worth “x”, that piece of equipment, that piece of machinery, that amount of stock, or that inventory, that has a value to it. And a lot of people in business will add value to their company by increasing your asset holding. And by doing so, when they're profitable, that can create some inherent value in their overall portfolio. So even in an instance where a business, let's say a construction business, where they do is sub out work and they get contracts. Their relationship is more intellectual than it is asset built, because their contracts and contacts go with the owner and their relationships. Whereas a construction company on the flip side that's asset bearing might have three bulldozers, two pay loaders, might have different kind of equipment and tools to do a job. We have some actual assets there that can be quantifiable to the next owner. So there's really two ways of looking at the value. And ultimately in business the value is really based upon when someone else is willing to pay.
Jeff: Also Gregg, let me ask you though is it not a good idea even if you don't plan necessarily on selling your business right away or the short term to contract the services of a professional appraiser or valuation company to get our true sense of what your businesses value is in fact worth?
Gregg: I think there's some good thought to that Jeff. Getting a business evaluation can be both negative and positive. It's positive to see what it's worth, absolutely. If you got a good CPA and a good accountant out there, he's going to be giving back to you every year, he reviews your financials. He's going to say, "This is what your bottom line assets are. To a bank, they're worth X, to a buyer they're worth Y, to you it's Z because that's what your net is at the end of the year and what you're paying taxes on." Having a business valuation is really good in the aspect, especially if you're growing or you want to test the waters. But I think it's negative too because I think a lot of times people will look at a good business both evaluation or valuation, as something that might be a little bit complacent bearing to them. If they know their business is doing great, a lot of times we sit back. It can be just as bothersome to someone who comes in and wants to exit. And they say, "My business is worth a million dollars" but the buying market may only say that your business is worth 600,000.” They get frustrated and it could be misleading in many aspects. I think it's good to have that valuation on an annual or every couple of years so that you know where you're going. Certainly your accountant should be able to give that to you. But I think it's almost watching stocks, or jumping on a scale every morning. If you don't like what that number is at any given time or if you're constantly chasing that number every day, it might do more harm than good.
Having a business valuation is really good in the aspect, especially if you're growing or you want to test the waters.
Jeff: Is your business born to be sold? I'm Jeff Allen. My conversation with serial entrepreneur and CEO of A2M Entertainment. Gregg Sharp will continue when Deal Talk returns in 60 seconds.
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Jeff: Welcome back to Deal Talk, I'm Jeff Allen with my guest Gregg Sharp CEO of A2M Entertainment, A2M Contractors, and Escondido Sports and Fitness. Talking with us from San Diego, his office there. Gregg Sharp I appreciate you being with us, it's been a great conversation so far, really enjoyed it. And you're obviously a very busy man so I feel fortunate enough that we were able to get some of your time today to have you talk with us just a little bit about your experiences in owning and selling businesses. I have a question here Gregg. I think sometimes we can be too close in our relationship sometimes with people. And also in our relationships with our jobs and the things that we do each and every day. And sometimes we can't see the forest through the trees, to use the old adage if you will. Is there any validity to the idea that no business owner should fall head over heels in love with his own business?
Gregg: Well Jeff, there's all different types of people out there. For me business is business. It's numbers. Numbers don't lie. But at the end of the day, you're worth really what your numbers say your worth. A lot of people get delusional by the fact that their business being personal to them, it's something they've created and they believe that it's priceless. They start to inflate, or over evaluate, or even exaggerate really what they're worth truly. I've seen that before. I've seen many companies out there, entertainment companies. They put out fictitious statements says they have a $25 million valued company. You look at their gross receipts and they're barely $200,000 annually. You start scratching their heads because you start to wonder what people really are thinking. And someone like that often times fail because they believe far beyond their actual capabilities on what they can do. And often times they overspend and don't see the market trends in front of them deteriorating or changing, and they get lost in their own ego. That's a bad thing. It's something that many business owners fall prey to. It's always too late when they realize it, but it's a common mistake and I see it a lot of times.
Jeff: How easy is it to look at your competition, and you've talked about an entertainment company and you're very well versed in everything required in so far as owning and operating an entertainment related company, from promotions and marketing. I think the whole aspect of the production that goes into it and the quality that's required, and the standards that right now are acceptable to some of these athletes and some of these companies out there. You know that business.
When you saw what the entertainment industry and the action sports industry had out there in terms of the choices they had for entertainment companies, what went in to your thinking process when you decided to go in and build up A2M Entertainment? Were you trying to do something better that was already being done out there? Were you trying to do something at a better value, maybe something that didn't cost as much money but still being able to provide like quality that was already in existence out there? What was the idea, to do it better than the other guys, to do it more cheaply than the other guys? At what point do you have to bring those ideas together and offer a little bit of both of those so that you're giving your clientele true benefits and advantages working with you rather than the guy down the street?
Gregg: When I first got into the MMA and the entertainment side of things it just grew under a need I felt in the industry…regional. Obviously, there are some very large entities out there ruling the world of MMA or the entertainment, sports and entertainment, I should say. For me to look at the big picture and say that I could ever be competitive on that really would've been the same as our last question. I would've been putting myself at a disadvantage because number one, I always say in business the only book that you really have to read at the end of the day is your checkbook. Looking at my checkbook I can say, "Can I compete against the neighbors?" And the answer is no. I didn't have the means to be able to put hundreds of millions of dollars into a large, nationwide, international company, more than I really want to, because it's a big risk. It's a very volatile industry, although it's one of the fastest growing industries and has been for the last five years, it's extremely volatile. What's good today is not good tomorrow. If you are really fall and prey to many of the things that you can't see. The athletes that are doing wrong, the naysayers out there that are looking to chop you down. There's a lot of negativity in the world of MMA and the world of businesses in general. So you’ve got to be able to keep yourself free of that.
But getting back to why, I felt there was a need regional for us to be able to have some quality events, being able to service the industry. I was very active in my gym at that time and I looked at a trend in the late 2000's that showed that mom and pop clubs were declining. I had to move my health club to an MMA health club type facility, which was really the first full fitness MMA facility on the West Coast that I can remember, and quite frankly may have been one of the first across the nation. I took the change there. It seemed like a logical step for me to create a promotional company to fill that gap, which was missing and was quality consistent combat events. And then ultimately I looked at it and said, "How do we become different?" Let's not be the same because if you're being the same you're going to get the same result as everyone else. Let's be different. And now we have a choice, and not only do we have a choice internally but externally our fighters, our fans, some people who are following have a choice. They'll be able to say yes, this is better in some aspects, and maybe not as good as others. And we look at those better aspects and really develop them and mitigate that through lesser aspects so that our value continues to grow. I think in any business that you do you really have to look at is there a niche for what you doing? Is that area over saturated? Can you be different? Being different is a key. Too many people want to be the same and all you're doing is splitting the market share, however many ways the market share can be split. Being different definitely gives you a unique market share. It's something that you can grow on. I actually called market share …
I think in any business that you do you really have to look at is there a niche for what you doing? Is that area over saturated? Can you be different? Being different is a key.
Jeff: Gregg Sharp the CEO at A2M Entertainment, you're listening to Deal Talk, my name is Jeff Allen. In your experience Gregg, what's the most difficult thing about transacting a business, about letting go of a business or about the process of selling one for you Gregg?
Gregg: For me personally, I think the real key here is to maximize value. I think there's a fine line between holding the line and realizing that it's time to move on. There have been some businesses where it's been an easy transaction for me. The price was right, and I took the opportunity, there’s been sometimes where I held on maybe a bit too long and the market has shifted on me. I think that what happens is that most people make that mistake in terms of not really knowing when the time is right. And what I've done to mitigate those situations is you put a time line on your business. Here's when I'm ready to move out and here is my game plan plan to get out. And it goes back to our first couple of questions; from the very start of buying a business now. I know how long I want to be in that business. If it's a five year turnaround, you're looking at my ROI to be X and that's what I'm shooting for. If it's a 10-year, or a 2-year, or maybe if it's a 2-week, maybe it's a dead end, or I see this value here but I also know that you're partnering with different people that are interested in business, maybe there's some middle ground where I come in and put myself in at a minority partner, or more of a consultant type basis. Then they have an exit strategy for me as well where they can say, "Okay, you've been working for a year, great. Here's our buy-sell agreement from the very beginning and we're ready to move on." I've done that as well. There's a lot of ways to do it. But I think the biggest thing is just know when your time is right. And no matter how hard you believe you put money into that business and time into that business, the market's going to bear with that value of your business is. And whether you want to hear it or not, that number is what someone else is willing to pay for it and not a penny more or a penny less.
Jeff: There you go. So everybody has to deal with the reality check at some point. And that reality check chances are maybe something that they may not necessarily want to hear. And oftentimes that's what the true definition of a reality check is; you get slapped in the face or you get hit up with some information that isn't necessarily the best news in the world. But at the same time it could possibly be the best of two options ultimately. Gregg, I want to thank you so much for taking the time out to talk to us today, one business owner who happens to own multiple businesses who's been able to share his thoughts and feelings about serial entrepreneurship and the things that are really important to think about when you're a business owner. I really do appreciate your time Gregg. Thank you so much.
Gregg: Jeff, it's been a pleasure. Please call me if you would like to have me on again.
Jeff: By the way too, in case somebody in our audience, and I know that we may have multiple people who would like to just find out from you Gregg, maybe they've got some questions that are specific to their business, or maybe they'd like to talk to you about your businesses and how you might be able to help them. How can they reach you?
Gregg: Well, certainly LinkedIn is how we actually came about to getting in touch with each other. My LinkedIn profile is Gregg Sharp. It actually may have a J, a Gregg J. Sharp. They can always reach me via email. I'm still old school. I kept my AOL address for a long time. It's firstname.lastname@example.org. Just drop me an email and find me if you want on Facebook or Twitter, Gregg Sharp on both sides. Get into a conversation. And if it fires us to get into a phone conversion I'd be more than happy to give you my phone number. We can talk for a little bit more about your concerns and questions, and ways to help you improve what you're doing.
Jeff: Wonderful Gregg, I appreciate that. By the way on LinkedIn that's Gregg with two G's, Gregg Sharp, and you can find his profile right there and read more about his companies, and you can see what he's up to. Gregg, again, my thanks, and we'll talk to you again soon.
Gregg: I appreciate it Jeff, have a great day.
Jeff: You bet, you do the same. That's Gregg Sharp. He's a serial entrepreneur, multi business owner from San Diego, California joining us today on Deal Talk and we're glad to have him with us.
And as always, Deal Talk is presented by Morgan & Westfield, a 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. And make it a point to check in with us again soon for valuable information and insight from our growing list of small business experts here on Deal Talk. My name is Jeff Allen. Thanks again for listening.