Name: Scott
Bio: Peer Business Group is a Middle Tennessee based business brokerage company. We help buyers in over 25 states buy small businesses with owner cash flow of greater than $150,000. We help businesses sell, in Middle Tennessee, with annual sales of between $500,000 and $10,000,000.
Posts by ScottH:
Taking a Bath on Citigroup
December 17th, 2009I bought $10,000 of C at $4.19 and it is going down quickly. I’d like to think I will look back positively in 5-10 years and this will all be worth a good laugh.
But right now, it doesn’t feel very funny. Can we get some new leadership at this company?
8.8 Million Dollar Inheritance
December 14th, 2009Today, I spoke with a blue collar worker in his mid-thirties. He was asking about a small pet services business and wanted to know if he was getting a good deal. During our conversation, we realized the business owner is simply asking to much for the business. So, at one point, I asked him how much he had to invest. “8.8 million dollars,” he responded.
He is considering buying a business for about $3o0,000 and expects to cash flow about $65,000. That’s if he and his wife each put in 40 hours a week!
What would you do? I responded by asking if he knew how much 3% of 8.8 million was. He is a blue collar worker and probably earns about $40,000. He come upon 8.8 million in inheritance and wants to know what to do. Can you imagine? Anyway, I told him that 3% of 8.8 million dollars is $264,000. The reason I told him that is because if he puts his money in an annual interest bearing account and gets 3% interest, he can take $264,000 every year and NEVER touch the principal. In 400 years, he’d still have 8.8 million dollars. If he got 7% interest, the numbers get silly to the tune of $616,000 annually. If he takes only $250,000 and banks the rest of the $616,000, His 8.8 million turns into over $45,000,000 in 20 years. Remember, he is still taking home $250,000 annually!
For some of you, $250,000 isn’t enough to live on. For him, he’s in his mid 30’s and has gotten used to living on $40-$70K a year (wifes income added). At a minimum, it’s an almost 4x increase in annual income.
I advised him to sit on the money for awhile. I hope he doesn’t do anything hasty…like buying a 40 hour pain in the butt pet services company so he can add an extra $3-4K monthly to his $50 million he’ll have by the time he’s 55.
Leasing Commercial Real Estate
December 9th, 2009According to my commercial real estate broker, leasing commercial real estate involves giving free months of rent, allowing for a build-out or build-out allowance, and also paying for utilities?! My broker tells me that it is customary to offer several months free rent here in Middle Tennessee. I am going to call on a close personal friend to help me with the minimal build-out required and will probably trade some web services for his labor. I do remember reading something about “triple net” leases and how triple net refers to the payment of utilities by the real estate owner. The extra stuff I was not aware of. I own an office condo and have an almost $1,400 monthly mortgage payment. The “rentable” square footage is 750 square feet.
This is not how I pictured it would go. I figured I would lease the space for an amount OVER the monthly expenses and make a profit…even if it was $5 a month. At the least, I thought I would break even. For those of you considering an investment in commercial real estate, make sure you take this into consideration. I realize it is one example but the commercial real estate environment is in tough shape.
I have a person interested in leasing the space for 3 years at between $20-$22.50 per square foot. If the deal goes down like my commercial real estate agent has advised me, then I will be losing money on this property every month. Welcome to the new world of commercial real estate. This is not a good deal. But, it is far better than paying all the expenses myself. I have had this property on the market for over a year and only one person has looked at the property. 2 people have looked at leasing it. Talk about no action. This should make you think long and hard about commercial real estate and the potential impact on our economy. Be very cautious.
I will update this post as things happen.
The Emotional disconnect-When a business deal falls through
November 24th, 2009Recently, I’ve met with a couple business owners who had what they believed to be very solid buyers ready to purchase their businesses only to have each of the deals go sour. These weren’t “pie in the sky” buyers who just expressed interest. These were buyers who did all the due diligence and, in one case, even had check issued. The buyer actually showed the seller the cashiers check he had for the down payment. The documents were all in place. The work of the attorneys were done. The parties just had to close the deals. Then, in both cases, both deals fell apart.
The oldest saying in business sales goes something like this: “it’s never a deal/sale until you have the check.” Unfortunately, for business owners, its not that easy to just say, “oh well, we’ll get the next one” like salespeople can do.
Unfortunately, emotions run high and, once the buyer gets really serious, business owners start to mentally transition to the next chapter of life. Money is, in their minds at least, already being spent. Trips might be planned. The spouse may be really counting on this next chapter of life. Whatever the reasons, the emotional disconnect between the business owner and his/her business is really tough to reverse. Once the business owner has mentally “jumped ship” it’s really hard to get back on the boat. The seas of business can be rough. Business owners work hard to beat the odds and create businesses worth buying. The buyer is found and everything seems to be in place. Then, the business owner mentally jumps ship. The business still functions but the owner is floating away from it. The ships starts to sail away and the business owner begins to watch. There may be involvement, but it’s only by force of habit. The passion and emotion is going and there is little being done to stop it.
As a business owner, you’ll eventually be faced with this predicament. What will you do? Will you fight the urge to spend the proceeds from the sale of your business…before the sale is closed? Will you be “optimistic” and believe this IS the buyer who will purchase your business. Or, will you learn from the above deals gone wrong? Will you keep your head down and keep working until the day the business is closed? Will you stay emotionally and mentally involved?
Until you’re there, the questions are easy to answer. Once faced with the situation, however, it’s much harder. Percentages say there is an 80-90% chance the deal will close if agreements are finalized. Above are two painful reminders of why you need to stay connected to your business until the deal closes…and the check is in your hand (or better yet, is cleared in your bank account).
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Scott Hill
Peer Business Group
“Helping our Peers Buy and Sell Small Businesses”
http://www.peerbusinessgroup.com
Just went to Vegas and bet C!
November 17th, 2009There is no way around it. Betting on Citicorp is like going to Las Vegas and putting some chips on red or black. Well…I just threw down some chips on C. I am telling myself I’d love to own this stock for the next 20 years because the upside is big. We’ll see about that. The reality is I think it’s 50/50 whether I win or lose on this stock. The 50% chance I win is based on the following:
1. John Paulson has recently bought a big position.
2. Hopefully, the worst of the recession is over.
3. I like the banking sector overall because, even though there has been a run up, some banks like Citicorp still have a long way to get to get back to legitimacy. IF they get back, the stock has upside.
On the 50% chance I lose, it is probably based on the following:
1. The company is in really bad shape right now and just doesn’t ever figure it out.
2. I am not convinced the current CEO is the right guy for the job (I bet if they found a good bank guy, the stock will go up).
3. Other banks are fairing much better.
4. Stocks really shouldn’t be this scary to own. I have plenty of stocks, that while they will go up and down, they are good solid companies you can really feel good about.
5. Commerical Real Estate problems bury Citicorp.
There are probably more reasons but this is how I based my decision. Let me know if you find compelling reasons for or against owning Citicorp.
Citi, financial stocks boosted by Paulson buying – MarketWatch
November 16th, 2009Citi, financial stocks boosted by Paulson buying – MarketWatch.
No sooner do I write a post about Citicorp and John Paulson decides to start buying. If it’s good enough for John Paulson, its got to be good enough for me. I have been watching this stock for a year now and have made a few short term trades. Some were winners, some were losers. I am itching to get into a fairly substantial position on C but just cannot pull the trigger. John Paulson might just put me over the top. I sold a couple of positions today and am positioned to trade. Now I have to pull the trigger.
JPMorgans Dimon says end “too big to fail” – Yahoo! News
November 14th, 2009
Citicorp
JPMorgans Dimon says end “too big to fail” – Yahoo! News.
Is Citicorp out of the woods? I don’t know. I’m not smart enough to figure that out but it does seem this article is directed squarely at the likes of Citicorp. While the stock is dramatically off its lows, it still seems to be a VERY risky stock. As much as I wish I would have bought some at the lows (who doesn’t), to get to financially involved with Citicorp seems like going to Vegas…with the odds stacked against me.
Fed officials cautious on economic recovery – Yahoo! News
November 10th, 2009Fed officials cautious on economic recovery – Yahoo! News.
A very encouraging article if just from the standpoint that our government sees the problems! They actually correctly listed the major problems with our economy which are high unemployment, heavy reliance on government support, and commercial real estate. WOW! Not bad. They did forget the HUGE US deficit and the business lending environment but I’ll let them slide since at least they seem to have their collective eyes on the ball.
Not sure how to gauge this administration with others because I am really now old enough, experienced enough, and interested enough to be following it. It do like what I see. They are working hard. They are trying things. They aren’t sitting on their hands. They are making mistakes. So what. At least they are working hard at the problems.
Bears Need to Hibernate
November 10th, 2009
I feel sorry for the Bears. October is gone and they don’t have the potential for an October plunge in the stock market. Traditionally, November and December are good for stocks. The Bears will just have to hope for bad economic news in their stockings this year or wait until the stock market gets overheated.
Frankly, I think the stock market is really close to overheating right now. We are most likely at the bottom or close to the bottom of one of the worst recessions of all-time and the run up since the bottom has been fast and steep. He’s hoping the stock market catches it’s breath and hovers for awhile until we can get jobs created. The dramatic ups and downs of the stock market are no fun.
For the Bears, go hibernate. We’ll see you in the spring.
YouTube – Elizabeth Lambert of New Mexico,APOLOGISES FOR SOCCER FIGHT AND GETS SUSPENDED 6/11/09 FULL VIDEO
November 9th, 2009YouTube – Elizabeth Lambert of New Mexico,APOLOGISES FOR SOCCER FIGHT AND GETS SUSPENDED 6/11/09 FULL VIDEO.
Why is Paul Krebs, UNM Athletic Director, not suspending Women’s Soccer coach Kit Vela? She let it go. Watch the video. As a parent, if my child hits someone, and I witness it, I discipline m child…IMMEDIATELY. Does Paul Krebs, the Athletic director of the University of New Mexico have kids? Is he the kind of parent that, if his kid misbehaves, he just lets it go on and does nothing.
Paul Krebs cannot be a parent. There is no way. That’s the only way to explain how he might not understand. So because he’s not a parent, I’ll fill him in. As a parent, I am RESPONSIBLE for my children. If they misbehave and are mean to others, I step in and teach them right from wrong. Otherwise, they are just left to freely act as they desire. If I don’t tell them something is wrong, then they must think it’s OK right? Yes, I miss things. Yes, my kids misbehave. It’s part of growing up. But, if I’m watching my kids, FOR 90 MINUTES, and they act inappropriately, I will step in. Kit Vela DID NOTHING! The refs are another story altogether. But I dare Kit Vela to say she didn’t notice what was happening.
Isn’t all this very similar to what a coach is supposed to do? Isn’t Kit Vela responsible for how University of New Mexico kids represent the University? I am sure responsible for how my kids represent MY FAMILY! It’s complete BS to say, because they suspended the player, everything is fine. FOCUS ON THE COACH NOW.
Does Paul Krebs, the athletic director, understand he has a responsibility to the community? The University of New Mexico has an obligation as an INSTITUTION OF HIGHER LEARNING. Does he understand what higher learning means? Does he think higher learning just means books?
Paul Krebs and Kit Vela have jobs they’d like to keep. So, UNM blames everything on the player and acts tough about a suspension so the problem with go away right? THE PROBLEM IS, it went on for 90 minutes and the coach DIDN’T DO ANYTHING. NOTHING. Mr. Krebs should suspend the coach to gain credibility because, this isn’t an isolated incident where the coach could not control the player.
Here’s the pathetic truth. If we didn’t make a stink about it, nothing would have been done. Someone rightly points it out and the University reacts and gives the canned apology. Absolutely pathetic.
