These were thrilling times for my family! My father was about to consummate the purchase of a business and my mom was looking forward to a quality of life change; to say they had high hopes for their future would be an understatement!
After riding for 800 miles in our Ryder truck, we finally arrived to Iowa in early January, with the dead of winter welcoming us. The winter weather seemed fitting, for my dad’s well intended plans immediately began to unravel and the anxiety of this life-changing decision had begun to set in. This would be the point where my dad realized how truly naïve he was regarding buying a business.
His plans of obtaining financing for the purchase of the business and a necessary operating line crumbled as the local bank turned them down; their reasoning being that Dad and his brother had inadequate personal wealth and business collateral. If that wasn’t a big enough punch, it was followed by the knockout blow that the major supplier (whose consent was required to consummate the transaction) rejected the request due to their lack of industry experience.
In most cases, this would have been the end of the road…the deal would have been dead and the sellers would have just moved on. But fortunately for my dad, the sellers had limited options, were burnt out, and thus highly motivated to find a way to make it work. To buy some time to find a solution, the sellers hired my dad and uncle as employees and they began learning and working in the business while my mother quickly found a nursing job in the local doctor’s office.
Over the next 9 months, the sellers leaped over and hustled up the corporate hierarchy at their major supplier and developed a relationship with an influential executive. This led to the introduction of my father and uncle, who then themselves built upon the relationship and ultimately proved to the supplier that they were good operators.
Simultaneously, my uncle and dad searched for alternative financing solutions but kept striking out; that is until a wealthy friend of the families was gracious enough to guarantee the operating line of credit with the same local bank that rejected them.
The last piece of the puzzle then nicely fell into place as the sellers conceded further by agreeing to finance 100% of the price. I know…hard to believe! I guess this goes to show you what can be accomplished when you have two highly motivated parties with a high level of trust between them. With that being said, things could have been much different if the sellers had realized their lack of marketability to monetize their business earlier and had time to change course. Thankfully for my family…they didn’t.
About a month after the transaction finally closed, the sellers exited completely. This was yet another bonus for my dad as the sellers ended up paying them for the transition period – opposite from normal course, but it benefited the sellers as they ultimately tested their buyers/debtors and likely a lot easier transition for them since they held control during that time.
I started my last post by mentioning “fate” as the theme of my father’s path to becoming a business owner. As I continue to recount his story, I can’t help but linger on that word. The series of events, as difficult as they were, all seemed to fall into place as if it was in fact fate that was manipulating the outcome. My takeaway though, as a succession planning professional, is that there is simply no substitute for persistence and hard work. It takes a certain breed to pursue entrepreneurship and my father’s story is likely not all that dissimilar at its core than that of all business owners. The challenges that test this persistence are usually many, and just when you think all the obstacles are over, another tremendous one pops up.
I’ll talk more about this in my next post, as their next obstacle was politically/economically driven that would once again require they type of tenacity that only true entrepreneurs can muster. Stay tuned.