I have just returned from a trip to California. Those who do not live there may be pleased to know that the State is on the mend. The budget turned a surplus this year, commercial projects in the Bay area are humming and housing prices are soaring. San Francisco is up 15%. For a light distraction before my first appointment I went to an open house in a modest neighborhood. The immaculately “Staged” 3,200 sf home on a 10,000 sf lot was priced at $2 million – and a cell phone bidding war started as I was asking for a spec sheet! In Fort Collins Colorado that house might fetch $425,000.
So you might expect that my contact would tell me that business – I mean real business – was booming and driving the wages that pay for these mortgages. Alas, he recounted sequester woes, and a shortage of skilled, motivated, labor. After 22 years he wanted out – now. Our initial interview revealed that he had done nothing to prepare for his exit. There was no heir apparent, no time to do an ESOP, no key man insurance, no cross purchase agreement with a minority stock holder. I asked what he wanted to do in retirement and he did not know. After a lifetime of engagement in the gaming industry he had no hobbies.
But all was not lost. A review of assets included a deep Rolodex of customers, suppliers, and consultants, plus intellectual property, and real estate. We discussed the possibility of downsizing a core operation and relocating to Colorado, where he could live in a palace and breath air you cannot see. The remainder of the company could appeal to a strategic buyer whose interest would include access to trade secrets that the owner took for granted. I left him with a personal vision template to create a written description of what a lower intensity life might look like. That prospect ended the meeting on high note.
The take-away from this post is that we can all benefit from the perspective of an objective appraisal of our business assets and what we want to do with them. Hard times expose weaknesses. The trick is to have a plan with enough time in the process to pick your exit date and avoid a fire-sale.