This month we are beginning something new with our newsletters.
We are going to take a look at two fictional companies and their decisions. Although they are not real businesses, they are made up of composites and circumstances we have dealt with and observed in our years as advisors. At points along the story, you may think you’d surely see things clearly and make the right decision if you were in that scenario. Remember though, decisions always feel right in the moment. This can be due to inexperience, overconfidence or simply not having access to the tools and resources that can help a business grow.
These two business owners may appear the same on the surface — small businesses offering auto repair services — but they have different challenges and circumstances to consider. Along with that comes different points of view and different blind spots. As we meet these business owners, see if you can predict where they might go wrong.
We are all human, and business owners simply may not know what they don’t know. That is, until it’s too late and hindsight shows them where they went wrong. You can’t just turn back time and start again, but you can find someone who can provide the experience, methodology, and tools to help you grow the value of your business to reach your goals.
ChuckM@EagleCorporateAdvisors.com
(702) 451-3250
A Tale of Two Businesses: Part 1
Fred’s Luxury Auto Services
Fred Jr. has just inherited the family business from his father, Fred Sr., who passed away suddenly. Fred Sr. founded the auto shop and ran it for 35 years. A very hands-on business owner, he always focused on the present moment, not putting thought into what would happen in the event of one of the 5 D’s — disagreement, divorce, disability, death, or distress.
Because Fred Sr. never put any plans in place, the legal transfer of the business assets would be a slow, gradual process as probate courts approved each step. The responsibilities, however, transferred suddenly, with Fred Jr. finding himself in charge immediately and he realized he’d have to learn operations along the way. Fred Sr. ran most of the day-to-day management duties and never trained anyone — not even his son — to take over. The sales team and mechanics knew how to do their jobs but didn’t have a big-picture understanding of how things flowed for the business as a whole.
Business capital did not appear to be an issue, luckily, as Fred’s Luxury Auto Services had been profitable and cash-flow positive for decades and did not have any loans — the garage itself was owned outright, and none of the equipment was rented. Because Fred Sr. did not owe any banks money, however, he did not put much time into his financial records, which were spotty.
Fred Jr. was not trained as a mechanic or service manager, yet he had confidence he could oversee the continued success of the business his father built. That business put him through school at a highly ranked private college and helped him travel throughout much of his 20s, after all. Fred Jr. feels ready to apply his worldly experience to managing the operations and keeping his father’s employees happy and productive.
Stan’s Car Repair
Stan never attended college, choosing instead to take vocational classes in high school that led to certification as an auto mechanic shortly after he graduated. Always a “car guy,” he was far more comfortable with gears and engines than with people, and he loved learning new technology. After about a decade working in a large automotive shop, he decided it was time to run his own.
He applied for a loan, putting his home up as collateral assuring his wife he’d work hard and make the payments. He bought furniture, equipment and tools with the loan and secured a lease on a garage building — yet another payment to worry about beyond the original loan and interest.
Stan was motivated to work long hours, and sought out other good mechanics to join him. While he and his small crew did good work on every vehicle, clients often could not get through on the phone and complained about his customer service. Stan’s experiences working his way up the ladder kept him fairly humble, so he realized pretty quickly that he could not handle the client interactions and answer phones himself. He decided he needed to find a good front office manager, but between the long hours, new responsibilities, and pressure of his business expenses, Stan was feeling overwhelmed and unsure of his future.
Differences in Risk
From the start of their careers as business owners, both Fred Jr. and Stan were undertaking different levels of risk. While Fred inherited his father’s establishment as a fully paid-off garage with equipment and an experienced team, Stan was operating at a deficit immediately. They both must take their financial starting point into consideration for any decisions they make going forward.
Their businesses each also came with value that might not be apparent on the surface. Fred Jr. had a customer base his father built up over three decades, as well as a reputation in the community. These customers will remain loyal and continue to recommend Fred’s Luxury Auto Services as long as they continued to get the level of service they expected. Stan was starting from zero in terms of customer base, but he had a passion for the work and the expertise to interview and hire other skilled mechanics, as well as the desire to continually level up his own technical knowledge.
Next Steps
One of the first assessments we do at Eagle Corporate Advisors is a SWOT analysis, to pinpoint the Strengths, Weaknesses, Opportunities, and Threats facing a business.
What are the strengths or weaknesses in the companies Fred Jr. and Stan are running?
In the next newsletter, you can test your ability as we begin to analyze each business and see what challenges are ahead and the choices made by each.
Whether you are a seasoned business owner or new to the game, and whether your business is withstanding a crisis or sailing on smooth seas, Eagle Corporate Advisors can be your partner in navigating toward growth, greater value, and attaining the trajectory you want out of life.
With enough work, anyone can keep a business running for a while — but with the right framework in place, the business can run with less work. Making your business work for you, rather than the other way around, is key to making it a stable, consistent source of income that might eventually transition smoothly to a new owner, whether an inheriting family member or an independent buyer.
At Eagle Corporate Advisors, we specialize in seeing the big picture and getting a sense of your goals and timeline. Then we can help you build that foundational framework to get on track toward attaining all your goals.