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An Alternative Approach To Finding And Buying An Absentee Run Business

Comments & Replies: 2     Views: 21697     Posted By: Business Broker  

As a business broker, the phrase I hear most often from my buyer clients is, "I am looking for an absentee owner business." Since it is such a popular topic of discussion, let me offer an alternative method of business selection with several ideas and tips that I offer my buyer clients when asked.

Topics: Buying A Business     Tags: absentee run, buying a business


Contributor: Business Broker, SF Bay Area

As a business broker, the phrase I hear most often from my buyer clients is, "I am looking for an absentee owner business." Since it is such a popular topic of discussion, let me offer an alternative method of business selection. There are a couple things to keep in mind as you search for an absentee owner run business.

1. EVERYONE is looking for an absentee owner business. So, if you are looking for an absentee owner business and are looking for a great deal, I don t believe you have a very good chance of that happening. You can view other articles here on BizBen that show the likelihood of finding a true absentee owner business.

2. Very few absentee owner businesses sell. After all people sell businesses because they are burned out, tired of dealing with employees, etc. With an absentee owner business, this is less likely to happen. If a business is completely absentee and profitable, why would anyone sell it? Even if someone is retiring, if the business is absentee and profitable, they don t need to sell it even into retirement. Many baby boomers aren t looking to sell their absentee owner business to retire, but rather to keep it to retire.

3. Related parties. In the rare exceptions, where even though a business is absentee it still needs to be sold, such as divorce or cash emergency, many times the business is sold to a related party, such as a relative, employee, vendor etc.

So to sum up, if for example (numbers are only for simple illustration purposes) 5 out of 100 businesses for sale are absentee owner businesses, probably only a few are going to make to the public offering arenas like BizBen. Also of 100 potential business buyers 95 have absentee ownership as the number 1 criteria for their business search. So, you have 95 percent of the business buying population looking at 5 percent of the business listings. That isn t where you are going to find your gem.

I suggest an alternative approach.

You will find your diamond in the rough, by looking at businesses that aren t absentee owner, but have the potential to become absentee, or become more absentee than they currently are. In some cases, business owners are so up to their eyeballs entrenched in the business that they fail to see certain small changes that can make the business more absentee.

Certain small business owners might poor delegators. Many small business owners believe that an employee won t do as good a job as they will so they don t like to let others do the important tasks. However, its common practice in large profitable businesses to delegate tasks even though the delegatee won t do as good a job. According to Peter Drucker, a good rule of thumb is if your subordinate can do the task at least 70 percent as well as you can, you should delegate.

Besides delegation, another way to improve a business is marketing. Many businesses have an owner who has extra time so he begins selling and marketing, until he creates an excess of business so he gets busy managing and stops marketing. Then once that business is complete and things start to slow down again he starts selling and marketing again and so what you end up with is a sales cycle of peaks and valleys and with no steady reliable sales revenue. It's difficult, in this situation, to be able to hire and pay for more employees. It's a vicious cycle.

Making some improvements to the marketing of your target small business, by creating automated marketing strategies and maintaining a marketing calendar can reduce these peaks and valleys, and therefore make it easier to hire and train staff and therefore create an environment that supports absentee ownership.

An injection of cash. Many small businesses aren t in need of any changes but instead just need an injection of cash to take it to the next level. In this case, the current owner takes all profit from the business each month to pay for his living expenses. Especially in the San Francisco Bay Area where living expenses are so high. So, because the owner takes all net profits to survive, he doesn t have any money left over at the end of each month to invest in growing the business.

Maybe the business needs an increase in inventory, a new sign, a new piece of equipment or some other capital expenditure. A simple injection of cash to purchase a "certain item" can drastically improve the profitability of a business and therefore the opportunity to become more absentee.

If absentee ownership is the number one criteria for your business search, look for businesses that aren t currently absentee owner, but can easily be converted to such. A little creativity and foresight will assist in making a business purchase decision that will get you the return on investment you are looking for as well as the level of owner involvement. It may take 6 to 8 months to get the business where you want it to be, but it is a much better approach than searching and searching for the illusive absentee owner business.


Craig's approach makes a lot of sense. Let me emphasize another dimension to his observation: often people are selling a business not because they want to, but because they don't know how to take the next step or don't have the resources to grow their business. Sometimes these sellers would be very happy to identify their particular skill set (e.g., marketing, production, operations, sales, finances, strategic planning, tactical management, or whatever it may be), and stay on in that capacity with a new owner who brings in the necessary supplemental resources to make the business successful. This seller may want to be an employee, or minority-share owner, or a combination of both. It's a valuable and proven platform for profitable semi-absentee management.

And, note I used the term "semi-absentee." I only believe in true absentee management in large multi-milion-dollar corporate operations where established management, a "deep bench," handles the day-to-day, week-to-week, month-to-month operations, and the owner is mostly focused on the long-term strategic direction of the business. Any small business owner needs to be committed to some meaningful oversight on a fairly regular and consistent basis -- like Tim Ferris's "four-hour work week."


  Helpful Resources To Assist In Selling And Buying California Businesses
Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of successful closings. Office: 909-255-8353, Cell: 509-951-7230.

Peter Siegel, MBA, BizBen Founder, ProBuy, ProSell Programs

Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.

Manjit Singh, Business Broker - SF Bay Area, Central Valley

Assistance in the SF Bay Area & Valley. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area, Central Valley liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429 Cell.

Harry Sidhu, CBB, Broker: SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.


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