Thinking it’s about time to sell the business?
An exit strategy is a must.
Whatever your area, there are as many ways to sell a business as there are to start one. It can take up to 10 months to sell a small business, according to the California Association of Business Brokers.
For owners looking to sell now or in the future, planning is everything. Succession plans may be as simple as selling only one’s route to handing the business off to a franchise, a family member or an existing employee.
“Succession planning should begin well before an owner plans to exit their business,” says Chris Webb, general manager and Florida broker for National Pool Route Sales, a brokerage for pool service and repair franchises. “For a larger business with several employees and multiple business units, this could be a year or more. An owner needs to plan as though the buyer will be new to their industry; put the people and systems in place to allow the buyer to take the helm of the company; and with a set amount of training by the seller be able to successfully continue the business.”
Keeping it in the family
When Johnny Mazza III took over Medallion Pools, a Virginia-based pool and swim spa manufacturing company, he had his work cut out for him. But, he learned from the best: His father and his grandfather, the latter of whom founded the company.
At age 12, he learned quickly that he was part of the family business: While other kids his age were goofing off, Mazza III says he was “sweeping floors and hating it because all my friends were out playing.”
For the Mazzas, it wasn’t an automatic handout when the third-generation Mazza stepped in as president earlier this year. Before taking over, he served as purchasing manager, then became the operations manager. Eventually, he became vice president, taking on lead accounts and building client relationships.
“You earned it; you’ve been here your whole life,” he recalls his dad telling him when the leadership change happened in March.
As an only child, Mazza III is thankful he doesn’t have to deal with sibling rivalry as he’s taken over the business.
“I see it so often; you can’t have two captains steering the ship,” he says of family-run businesses. “Sure, you want to take the advice of the people around you. But ultimately, it has to be one person who makes the final decision.”
He’s seen friends with local businesses struggle with that aspect. When drama does unfold, he points out that his relationship with his dad is a good one: “Ninety-five percent of the time, we get along great,” he says.
He’s also grateful his dad is still active in the company as chairman of the board and has an office on site. There isn’t a day that goes by that Mazza III doesn’t ask his father for advice.
Others looking to keep a family business going must have faith in the person taking over, Mazza III says. He advises not just handing it over because it’s family or because it seems like the right thing to do.
“Whoever you’re handing it down to, they have to be capable of running it,” he says, “or they’ll fail.”
Becoming a franchise
Frank Disher believes going the franchise route may have been the best business decision he’s ever made.
About five years ago, after 20 years in business, Disher decided a Poolwerx franchise would help him become more profitable and stable for the future sale of his business. Now his businesses include Poolwerx Keller and Poolwerx Lantana, located in North Richland Hills, Texas, and Bartonville, Texas, respectively.
“Like many other pool guys, I suck at business,” he says. “I was not properly protecting myself; I’m sure I cost myself a couple million in bad decisions.”
It has made him rest easier knowing that when the time comes to sell, he’ll have the support of a national franchise. He believes Poolwerx can get more eyes on his business than if he were to sell it on his own.
“Eventually, I’m going to want to sell my business,” Disher says. “Franchises sell much better and at a higher price than independents. They have good support and training. It does increase the value when you go to sell. That was a huge consideration of mine.”
Disher warns that franchises aren’t for everyone. While he gets the flexibility to make decisions, he does follow a franchise framework.
“If you’re headstrong and don’t want to listen to anybody, don’t go franchise,” he says.
Route and out
For those who want to sell pool routes, this can be done through a broker or for sale by owner, depending on the time and effort a pool route owner wants to put in.
Erik Taylor, owner of Chlorine King Pool Service in Seminole, Florida, sold his first group of 10 pool routes in 2019. Taylor says he has always preferred to sell to individuals.
“As long as you have a solid contract and the buyer has money to put down, it’s really the most straightforward way to handle it,” he observes. “The more people you have involved, the more people who are going to want a piece of the pie for your hard work.”
On the other hand, there is the missed opportunity for a massive marketing campaign for those who opt to strike out and sell on their own, says Webb. His company, National Pool Route Sales, uses the internet to market to thousands of interested prospects. He also advises pool pros to be ready to potentially spend “the hours to respond to potential buyers, explaining their business — perhaps providing unneeded documentation only to have them disappear or not have the money.”
It can be a frustrating experience, Webb says, for the underprepared seller.
Taylor says emotions can get in the way, too.
“Selling a pool route is a little nerve-racking for a few reasons,” he says. “You’re letting a part of your business go that you spent a lot of time both mentally and physically building up.”
Taylor adds that letting go of loyal customers can be hard as well.
“If you have struck up a good relationship with the client[s], then it may pull on your heartstrings to put them in the ‘for sale’ pile,” he says.
According to Taylor, either option requires honesty and integrity to ensure the success of the buyer’s newfound business.
“Don’t hide anything,” he says. “Don’t be a sleazeball and try to pawn off all of your crap accounts onto an unsuspecting buyer. Get a good contract, and get the signatures notarized. Be fair to both the buyer and the clients you’re selling off. Also, offer support after the sale. I’ve actually gotten a lot of repairs and other work from the buyers when they couldn’t take care of something. So it’s a situation that can give back to you down the road if you handle the sale right.”
No matter the type of sale or succession, consider consulting a tax expert and potentially an attorney. Any sum of money should be protected in writing. Consider other areas such as gifting, trusts and estate planning, if necessary.
