In October of 1980, suburban Chicago resident Eric Nerad decided to leave behind his days of being a journeyman mechanic to start his own venture. He saw the opportunity to improve on how automobile dealers were treating customers, so he and a partner rented out an old two-bay gas station near the historic Route 66 in Burr Ridge and got to work. They appropriately named it B&E Auto Repair after each of their names. Nerad would spend the next 36 years as owner of B&E Auto Repair, where he managed customer relations, auto repairs and a variety of other administrative duties that come with being your own boss.
As the business flourished, Nerad’s business needs grew and the aged two-bay shop just wasn’t enough. Nerad decided to move six blocks down the road to a much bigger location with twice as many garage bays. Staying in the same proximity as the original shop helped maintain his existing customer base, while the larger space allowed him to accommodate repairs on medium-duty trucks, gaining new ones.
With more work, came the need for better processes so Nerad also upgraded the shop’s customer system to help organize work histories and maintain service orders. The upgrades weren’t just to make his life easier, but also to make it easier for his customers to get in, get out and be on their way. This was all part of Nerad’s shop motto to “treat people the way you’d like to be treated” to which he credits his shop’s longtime success.
What makes small business ownership so great is being directly responsible for the success of the company through your own blood, sweat and tears. Of course it also takes a great deal of determination to find success. When life interferes, as it tends to, it’s a tricky and at times impossible balancing act to maintain your life and your business. This was the case for Eric when an unfortunate event caused him to choose between family responsibilities and his auto shop. While it wasn’t easy, he took this as a sign to move on from B&E. “I originally planned to own [B&E Auto Repair] longer, and it was incredibly difficult to let go of something I had built from scratch,” says Nerad of the decision to sell. “My mother was sick and I knew it was time to sell the business in order to care for her full-time.”
With the decision made, he contacted a broker for pricing advice and gauged the market using BizBuySell’s valuation report. He then listed the business for sale at an initial asking price of $295,000.
Finding the right buyer was important to Nerad. After spending several decades building up his business, he wanted to pass the keys over to someone who would treat B&E Auto Repair with the same level of respect and professionalism as he did. In addition to technical ability, candidates needed to be just as passionate about the auto repair industry as Nerad. With his business’ legacy at stake, Nerad’s next step was getting to know the candidates beyond their financials and previous work experience.
How to ensure a smooth transition
Once a company is listed and offers start coming in, the next step is sorting through candidates to identify the ideal successor. With multiple applications to evaluate, Nerad began by conducting background checks on several candidates to weed out individuals who, while qualified, were not the right fit for his auto shop. Initial conversations and background checks then delivered the three buyers who best fit Nerad’s expectations and had the financial resources to assume ownership immediately.
Getting to know the current owners began with introductory emails before progressing into in-person meetings and talks of negotiations. Luckily for Nerad, he shared several mutual acquaintances with the prospective buyers and liked that the three individuals had worked at another local service facility.
Thanks to plenty of interested buyers who had the technical chops to inherit his business, Nerad was able to turn around a sale rather quickly. Focused on the long-term success of his company, Eric took several precautionary steps to guarantee a smooth transition of ownership. A first time seller, Nerad listed these key lessons he learned before successfully handing over the keys to B&E Auto Repair:
- Compile your business financials over several years: The economy can change on a dime, and sometimes a downturn can occur right as you’re thinking of listing your business. But one year of poor business performance doesn’t mean your sales opportunity is doomed. Records of strong transactions over several years can reassure buyers that the business has the potential to remain consistently profitable over time. Nerad was able to establish confidence in his buyers using records compiled over the previous three years. Despite a slower prior year, the overall history of B&E helped buyers recognize the potential of the shop rather than focus on just the most recent period
- Staying on as an employee can be a win-win: As a business owner, it can be challenging to give up the company you’ve spent years building from the ground up. Instead of letting go completely, consider negotiating with the new owner(s) to stay on as a part-time consultant or even as an employee. With one foot still in the door, former owners can monitor how the new owners run the business while offering advice during the transition stages. It can also help long-time customers acclimate to new ownership. This gives you as a seller some additional income and stake in the business, while the new owner gets a seamless transition. For B&E, not only did the buyers agree to keep the original name, they also agreed to retain Nerad as a mechanic on contract, which he continues to do. Now Eric is able to do what he loves without the time commitment ownership brings.
- Look for buyers with similar work experience and trustworthy references: For niche industries like the auto repair business, selling to an inexperienced buyer can turn into a big mistake. This is especially true when offering seller financing, where future success of the company is vital to the size of your bank account. A savvy businessman might know how to balance a checkbook, but those skills are useless if they don’t know how to address their client’s specific needs. During the initial screening stage, sellers should go through a thorough interview process to ensure candidates are more than qualified to inherit their business. References also boost a candidate’s credibility, especially if a buyer’s referrals come from other professionals operating within the same industry.
Selling your business by yourself can be daunting, especially if you choose to enter the market without the help of a broker, which is why using a broker is our recommended route. This is even more important when also battling difficult life events as was the case with Eric Nerad, which makes his story that much more impressive.
If you do plan to sell your business on your own, make sure you have the resources to handle marketing, interviews and negotiation without interfering with the success of your business. While online marketplaces such as BizBuySell help to simplify this process, your businesses financial performance is the best indicator of value and not worth risking if you don’t have the necessary time to dedicate to the process. We also recommend you keep your listing as confidential as possible so as not to scare off customers or the employees which are all part of the assets being purchased.
Whether through a broker or on your own, the important thing is to be ready for your sign to move on. With that, our best advice is to think about your exit plan today for when life happens tomorrow.