firm connections: rural businesses and rural asset building...valuation of business –reality check...
TRANSCRIPT
Firm Connections: Rural Businesses and Rural Asset Building
Ines Polonius @ alt.Consulting, Inc. September 17, 2014
alt.Consulting
16 employees / 4 offices: oPine Bluff, AR o Jonesboro, AR oNorth Little Rock,
AR oMemphis, TN
The Geography Arkansas – Mississippi Delta
Depopulation – From 1990 to 2010 counties lost between 4% and 20% of population
Poverty - Between 22% and 34% of individuals live in poverty
Unemployment – Between 10% and 14% of individuals do not have and cannot find work. Mismatch between few available jobs and available skills
Businesses with fewer than 9 employees created 108,706 new jobs throughout territory between 2006 and 2010.
Catalyzing Factors 2012: Our largest client handed business over to grand-
daughter with no preparation = Crisis
Staff meeting: Reflection on businesses lost to retirement and illness resulted in astounding number.
“Official” data not available
Focus groups with bankers and CPAs which verified our assumption…
The Delta is losing 100s of viable businesses to “Aging Out” every year!
Keep It Local: The Existing Business
We are not a business broker!
Risk Assessment of Existing Business – Is it viable?
Full financial analysis – Is it healthy?
Valuation of business –Reality check for owner
Strategy to strengthen and grow business
Inclusion in database with owner’s permission
Creation of Prospectus about business
Keep It Local: The Young Entrepreneur Maintain database of interested
entrepreneurs
Identify potential entrepreneur: Manager within business Returning “youth” Local customer or vendor
Provide managerial assistance to prepare entrepreneur to take over business
Keep It Local: Capitalizing the Deal
Owner financing keeps owner engaged
Determine loan size based on business cash flow
Engage investors from community
Future strategy: Raise equity capital to enable investment in and control of venture until new entrepreneur is ready to take over
Staffing and Funding
One staff consultant specializes in sale of businesses and valuations
All other staff consultants are trained to work with new entrepreneurs
Pilot funded through USDA Rural Business Opportunity Grant (RBOG) in 2013.
Now integrated in our budget
Seller pays full rate for our work
Impact by the Numbers
Initiative started in February 2013 (18 months)
Successfully transitioned 8 businesses
Saved 44 full time jobs
Created 11 new jobs since transition
Saved $3.1 million in annual economic activity and corresponding sales taxes
8 families turned small business into retirement income and intergenerational wealth
Enabled 3 low-income individuals to secure a viable business
Impact: Meineke Car Care
Karen Worthen – single Mom with no assets and no income
Becomes Store Manager at Meineke in Pine Bluff, AR
Owner wanted to retire in another state
Owner financed $75,000; alt.Consulting financed $45,000
Has grown business by 7%, is profitable and has never missed a payment
Lessons and Advice
Lessons:
Have access to equity – your own or interested investor to speed up deal
Get into existing business early!
Advice:
Engage tax accountant/attorney to protect assets of existing owners
Ensure each party has attorney
www.altconsulting.org
Thank You!
Pine Bluff, AR 211 West 3rd Ave. Suite 255 P.O. Box 9858 Pine Bluff, AR 71611 870.535.0011
Memphis, TN 516 Tennessee Street Suite 234 P.O. Box 40210 Memphis, TN 38104 901. 312.9797
Jonesboro, AR 319 University Loop West Suite 220 P.O. Box 16264 Jonesboro, AR 72403 870.680.8285
North Little Rock, AR 516 Pershing Blvd North Little Rock, AR 72114 Phone: 501-352-3400
Presented by: Ines Polonius, Executive Director