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American Business Brokers & Advisors Founder & President MERGERS & ACQUISITIONS BUSINESS VALUATIONS
FEBRUARY 2024
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The Good, the Bad & the Ugly Sometimes Ego Gets in the Way of Good Business Sense
The day started no differently than any other day, yet I can remember it vividly even though it was 30 years ago. On this particular day, I was the president of the company I had started 10 years earlier. I owned and operated 75 video rental stores around the country and was opening stores at the rate of 4–5 a month, which we continued to do until we got to 155 stores when I sold the business. I still had the core people who had started with me when we only had a dozen stores, and now the team had grown exponentially to maintain the operations of the business and continue to keep up with the rapid growth of the business. In layperson terms, we were over our heads and winging it every day working to keep the stores operating and generating a positive cash flow. Since I am a sales guy at heart, my first priority in running my business has always been to find out what the sales are for each of the stores every day, because if you do not have enough sales to cover your operating expenses, then you are not in business. Instead, you are going through the motions of operating an unprofitable business, which is sucking cash from the businesses that are producing a positive cash flow and stealing your time, energy, and talents from yourself and your team. The first thing I would always do when I got to my office was to get the previous day’s sales for each of the stores, listed in declining order from the top sales to the bottom sales. Immediately, my eyes would always go to the bottom of the list to look at what stores were not doing well. Sometimes, the stores at the bottom were new stores that had
not been open for very long, and they were in the process of building their sales. But most of the time, these were the same stores that had been open for a while and they just were not getting better. The stores that were the laggards of the group were sucking my people’s resources and my money by not being productive, and it was driving me crazy because I couldn’t figure out how to make them profitable. When you operate a lot of stores, you naturally have quite a number of vendors who provide services and products to you to maintain your business. Basically, your vendors are your partners, and my biggest vendor was the movie supplier I spent the majority of money with, so he was my partner, too. His name may not have been on my corporate paperwork, but he was my partner. His name was Jay Schultz, and he owned one of the largest video supply businesses in the industry and operated a very successful business. He had been my main supplier of movies for a number of years, and we had formed an exceptionally good relationship; I respected him for his business acumen. On this particular day, Jay called to ask me how things were going with my business since he knew how fast we were growing, and his company had been supplying us with thousands of videos on a weekly basis. (Translated, this meant I owed him a lot of money and he was checking in to make sure we were making enough money so he would always get paid.) I shared with Jay my routine of checking the daily sales of all my stores and how I was working on improving the sales of the weakest- producing stores. Jay listened to me as I
explained my situation in detail, and when I was done giving him my synopsis of how I was addressing the unprofitable stores, he said, “Terry, you are doing everything ass-backward.” Even as I write this 30 years later, I can still feel a vibration through my body after hearing this statement from someone whom I respected and looked up to. I didn’t know what to say, but Jay continued by saying, “In business, the worst thing you can do is to spend your time and resources on trying to make your bad stores good. Your only goal in business is to strive and work on making your good stores great, and if you can’t make your good stores great and they are still bad stores, then you should get rid of them because eventually the bad stores will suck you dry of your time and talents and more importantly, your cash flow.” Jay was right, and what he said 30 years ago is still prevalent today. As a multi-unit operator, some stores will never be profitable in your portfolio, but they would be profitable if another operator with a different business plan than yours owned them. If not sold, then they should be closed. Generally, the only thing stopping an operator from selling or closing these stores is their ego. I know because I had the same problem with my ego, and I felt like if I closed a store, I was a loser. I have spoken with countless operators over the years, and they all have told me the same thing. Oh, Terry, if I close that store I will feel like a loser. How dumb is that? We are letting our ego run our business. The good thing is I learned this lesson early on and have applied this advice to every Continued on Page 3 ...
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Beyond the Stage
PHILIP SEYMOUR HOFFMAN’S ESTATE OVERSIGHT
substantial estate worth over $35 million, primarily bequeathed to his long-term partner, Marianne O’Donnell. A glaring issue with Hoffman’s will was its outdated status, failing to encompass his entire family. Drafted in 2004, it only acknowledged his son, Cooper, with daughters Tallulah and Willa, born after that, absent from the document. This oversight necessitated a complex navigation through New York’s probate system, showcasing the need for everyone to update their will regularly. The situation raised significant questions about how Hoffman’s daughters figured into the estate since they were born after the will’s creation. Thankfully, New York law, like many other states, offers protection for children in this situation, provided there’s no explicit intent to exclude them.
Hoffman’s choice not to marry O’Donnell further complicated matters, leading to a substantial estate tax burden. Unmarried, Hoffman’s estate faced a staggering tax rate of up to 40% federally and 16% in New York State, culminating in a potential $14 million tax bill from his $35 million estate. Marital status plays a crucial role in estate tax liabilities, something entrepreneurs with significant assets should note. Hoffman’s case exemplifies why proactive and continuous estate planning matters. Regular updates to one’s estate plan can significantly ease the burden on your loved ones during times of grief. It’s a stark reminder to meticulously manage and regularly revise your estate plans, especially for entrepreneurs overseeing considerable assets. It ensures your final wishes are honored, and your loved ones are provided for.
The unexpected demise of actor Philip Seymour Hoffman at just 46 shocked the world and brought to light the intricacies of estate planning. His passing left behind a
The Pursuit of Wealth vs. the Pursuit of Happiness
THE FISHERMAN AND THE INVESTMENT BANKER
An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it. The investment banker was impressed by the quality of the fish and asked the fisherman how long it took to catch them. The Mexican replied, “Only a little while.” The banker then asked, “Why he didn’t stay out longer and catch more fish?” The Mexican fisherman replied that he had enough to support his family’s immediate needs.
could spend more time fishing, and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until, eventually, you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman, you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing, and distribution.” Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City, where you would run your growing enterprise.” The fisherman asked, “But, señor, how long will this all take?” to which the American replied, “About 15–20 years.”
“Millions, señor? Then what?” the fisherman asked.
The investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.” It is amazing how this parable so accurately depicts the “rat race” and everything that’s wrong with it. The banker falls prey to the trap of the rat race, an endless, self-defeating pursuit of financial wealth at the expense of the present moment.
The American then asked, “But what do you do with the rest of your time?”
The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village every evening where I sip wine and play guitar with my amigos. I have a full and busy life, señor.”
“But what then?” asked the Mexican.
How many of us can relate to this parable? I know I can.
The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”
–Terry Monroe
The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You
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SUDOKU (SOLUTION ON PG. 4) Take a Break!
"HIDDEN WEALTH" The Secret to Getting Top Dollar for Your Business
► What is the value of what you are selling? ► Want to make sure the sale is confidential? ► Want to sell everything together & fast? Terry has sold over 857 businesses. His book tells you what to do and more importantly what NOT to do when selling one's business. GET YOUR FREE COPY TODAY! Email Terry@TerryMonroe.com Put FREE COPY in the subject line for your free copy of "Hidden Wealth", a ForbesBooks publication.
... continued from Cover business I have been involved in. The bad thing is all of the time and money I lost by not having my priorities in order. And the ugly part of this story is if you ignore this advice and continue to focus on stores that don’t have a chance of being profitable, you will waste time, energy, and resources you will never get back. I hope you don’t make the same mistake I made and had to learn the hard way and, instead, heed the same advice that Jay Schultz gave me and focus your time, energy, and resources on making your good stores great and not waste your time and be delusional like I was trying to make your bad stores good. TERRY’S QUOTES OF THE DAY “Before you marry a person, you should first make them use a computer with slow internet to see who they really are.” –Will Ferrell “You know you’ve reached middle age when you’re cautioned to slow down by your doctor, instead of by the police.” –Joan Rivers “Before borrowing money from a friend, decide which you need most.” –Addison H. Hallock
WORD SEARCH
AQUARIUS CANDY CUPID GROUNDHOG
HEART LINCOLN CHOCOLATE PENNSYLVANIA
PHIL PRESIDENTS VALENTINE WINTER
–Terry Monroe
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INSIDE 7824 Estero Blvd., 3rd Floor Fort Myers Beach, FL 33931 1 2 A Hard Truth I Learned 30 Years Ago Lessons From Hoffman’s Estate
Sudoku Solution
The Parable of the Rat Race
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Thinking About Selling Your Business in 2023?
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A New Era for Wrexham AFC
THE REMARKABLE RISE OF WREXHAM AFC
In the world of football, fairy tales still exist, and Wrexham AFC’s return to the Football League after 15 years is living proof. At the heart of this Cinderella story are two vital elements: the club’s transformation under the ownership of actors Ryan Reynolds and Rob McElhenney and the heroics of Paul Mullin, a striker whose performance was pivotal in the team’s promotion. Wrexham AFC’s journey required resilience. When fans in the form of the Wrexham Supporters’ Trust took control of the organization in 2011 following financial struggles, they set the stage for the club’s comeback. The revival gained momentum in 2021 thanks to the $2.5 million investment of Reynolds and McElhenney. Their vision was not just tied to their financial input; it was about keeping the club rooted in the community in Wales. And thanks to their work, crowds once numbered in the hundreds now roar with thousands of passionate fans.
Amidst the transformation, Mullin emerged as the team’s talisman. His 38 league goals, including crucial strikes in the decisive game against Boreham Wood, were instrumental in sealing Wrexham’s promotion. Mullin’s journey reflects the club’s own — filled with determination and a relentless pursuit of success. His scoring propelled the team to new heights and reignited the spirits of a town that breathes football. The streets of Wrexham, once quiet, now resonate with the cheers of red. Pubs packed, the atmosphere electric, and the community united — the impact of Wrexham’s success transcending beyond the field. It’s a story that captures the essence of football: the unifying power of a team’s triumph, the joy it brings to its supporters, and the realization of dreams long lost. Reynolds and McElhenney’s presence in the stands, alongside the fans, epitomizes the club’s journey. Their emotional investment
and Mullin’s on-field heroics have written a new chapter in Wrexham’s history.
“The takeover by Ryan Reynolds and Rob McElhenney has been surreal, but they seem genuinely sincere. They don’t just seem to be here to make a documentary and leave after two years … There’s been more good press coming out of Wrexham recently than there has been for decades — how could you not be happy with that?” Joe Gill, 34, a fan from Nantwich, England, told The Guardian.
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