Acquiring Entrepreneurship

Acquiring Entrepreneurship

Buying an existing business is a legitimate path to an entrepreneurial second act.

The Census Bureau reports that baby boomers own over 2 million businesses. As boomers age, run into health problems, and burn out, they will need to do something with their companies. Some plan to turn the keys over to their kids or employees or even close the doors after a lifetime of effort. Many others are seeking a buyer. The right buyer is likely to be a local and preferably a good guardian of their baby.

Covid-19 has thrown a monkey wrench in those considered plans. Without the luxury to sit back and wait for the market to recover, it may have become more of a buyer’s market and a lucrative entrepreneurial opportunity.

Most people have a limited view of entrepreneurship—get an idea, start from scratch, and make a go of it. 

That’s the common misconception. A more comprehensive definition of entrepreneurship is “The pursuit of opportunity without regard to resources currently controlled.” This includes buying an existing business, among the myriad approaches. The opportunity is to use experience, knowledge from previous job(s), and fresh energy, with the resources of accumulated savings, loans, and any severance payment to propel an existing business.

Jeff Schuppe entered the entrepreneurial arena after amassing experience at an established corporation. He was in his 13th year at the same company when the owner hired someone in between them as Schuppe’s new boss. After exploring several alternatives, Schuppe decided to buy and build up an existing business. After meeting with multiple bankers, attorneys, accountants, and brokers, and exploring several options, he bought Schad Tracy Signs.

Schad Tracy Signs is a fully integrated sign company with facilities in Oronoco and Burnsville. The company started with painted signage in 1979 and moved through neon, fluorescents, and now LED signs with aluminum, steel, and acrylic fabricated housings. The owners  were facing retirement and had delayed updating and upgrading the business. The opportunity was to modernize the fabrication plant and set it up for growth.

Immediately after buying, Schuppe gave staff the opportunity to air frustrations and offer ideas. He picked up on several of the ideas and made immediate and broad changes, including adjusting compensation to market rates, adding health benefits, promoting key employees, redesigning the workplace, and adding marketing and customer service initiatives.

I interviewed a handful of the 19 employees to hear their reaction to these changes. They had been fearful that the company would be shut down and its assets sold when the previous owners retired. All were relieved and delighted with the wholesale improvements and revamping. They specifically mentioned changes like having better communications, improved morale leading to pride in their work, and feeling invested and engaged in the business.

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Schuppe says first-quarter 2020 was the best in about 10 years, with revenue up 17 percent and earnings maintained in spite of booking most of the $200,000 in expenses from the comprehensive changes in 2019.

The pandemic has caused physical, operational, and financial setbacks. Backlog kept the company busy till mid-March, then it briefly shut down. A cash conservation regimen was put in place, including a freeze on hiring and wage increases, smaller quantities of material, and postponing capital expenditures. A PPP loan has helped maintain payroll. The team’s extra time is being used to prepare for a new normal by cross-training, cleaning, and developing more efficient systems.

Schuppe’s sales staff worked hard and brought in new projects and clients from social media marketing. The company reopened in mid-April, with new orders from hospitals, cities, and other essential businesses. Interior work and installing at customer premises is still a challenge.

Overall, Schad Tracy’s year is down 19 percent as of June. They have adjusted the business to operate  near break-even with lower revenue.

In spite of the crisis, Schuppe is pleased: “The purchase was the best thing that happened to me. I am thankful that I had time beforehand to make changes before the crisis hit.” That he is scouting for additional acquisition opportunities in the field is a testament to his confidence in the future.

Rajiv Tandon is executive director of the Institute for Innovators and Entrepreneurs and an advocate for the future of entrepreneurship in Minnesota. He facilitates peer groups of Minnesota CEOs. He can be reached at rajiv@mn-iie.org.

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