Road Trip to Visit Business Owner: Specialty Farm Produce

Well, maybe not a road trip.  As some readers know, I use an airplane in my business broker / mergers and acquisitions business and use it when I can to visit business owners that may wish to sell their businesses and also to arrange visits between business buyers and sellers.  I apologize in advance for this blog entry – I write as much about flying as about the visits on these "trip reports".

In this case a business broker in the California central valley had a large client and he wanted some help in assisting them.  We arranged to meet, and the morning of the meeting I awoke to raining skies – not a good sign when I’m planning to fly somewhere.  But it was a weak storm and it looked like I could make it safely.  I preflighted my plane and flew over to Lincoln, CA to pick up my partner Graeme, and then to Jackson, CA to pick up another partner, Craig.  Craig’s airport was under a dense carpet of clouds almost down to the ground making it impossible or at least very dangerous to land, so we called Craig on his cell phone and said, "have a nice day" and then we continued flying.   I did an instrument approach into Modesto, CA in low visibility weather but no rain.  We met the business broker at the airport and he drove us to the meeting.

The business owner is a very impressive, young guy who has done a fantastic job of building his specialty produce company.  I wish I could describe it in more detail but I can not without breaching confidentiality.  He started as a produce broker and figured out how to produce some specialty products.  A large merchant like Walmart picked it up and he spent a few years providing exemplary service to this large chain – and it continues to pay off.  Fortunately for him the grocery business is fairly recession proof as people tend to stay home more vs. going out to eat. 

He makes around $2 million each year in earnings, but is getting burned out.  He has a passion for a hobby that he can’t fully participate in, and just plain wants to do something else.  That is a pretty typical reason for selling – burn out - although sometimes that doesn’t play well with buyers.  They just can’t believe someone would burn out, and think there must be some sinister reason for selling (of course, sometimes there is that too).

This type of business is prime for a private equity group (PEG).  These are groups of professional investors that will buy small companies and grow them, hoping themselves to sell them to a larger company later (or go public, but not so much any more).  They will buy the entire company, or sometimes just a piece.  One thing they require is a healthy profit margin, and most of them will not even consider a company unless it is throwing off $1 million in revenue.  Ask me how I know that.  It is surprising how many there are out too – the leading database is probably www.privateequityinfo.com and they claim many thousands of firms, although I happen to know a lot of those are not active.

We described to this business owner what his options were.  Besides private equity there are private buyers (not likely) and arger companies in his industry.  We offered to do a valuation of his business so he would know what he would likely get from a sale. 

Then it was back to the airport.  By this time it was raining hard and I couldn’t concentrate on what the other broker was saying.  It was time for me to focus on rain, clouds, icing, routing, etc.  I got a complete weather briefing from the FAA at the airport, then a brief preflight (its OK not to do a full preflight since it is the second flight of the day), then took off into the rain and clouds.  For some pilots this is routine, but I don’t get enough "weather" flying that it is routine for me.  I stay current in instrument flying and it is safe, but it takes a lot of focus and concentration. The freezing level was reported at 6,000 feet and we were flying at 6,000 feet so we kept an eye out for airframe icing.  Any ice would have been easy to deal with since we were flying over the valley and all I would have had to do was descend a little or even a lot and then wait for the ice to go away.  I did an instrument approach into Lincoln and dropped Graeme off in the rain, then took off for my short rainy flight into my home airport of Placerville. 

In the end it seemed like a lot of work and aircraft fuel for one meeting, and the business owner isn’t at all certain he even wants to sell.  But that is what I do, and of course now and then a business owner does wish to sell and we help him do it.