It brings me to the wise words of my friend Paul, 54 years old, who at the depths of the recession in 1991, was tossed out of his Senior VP-Marketing & Sales job after 29 years with the same company:
"I discovered two things, John: It's true that there aren't many jobs. But there's certainly plenty of work!"
Acting on this insight, Paul, who'd led a hundred people at headquarters and a thousand in the field sales force, immediately got in touch with the presidents of smaller companies marketing to the same types of customers he'd dealt with for 29 years. He also contacted the presidents of customer companies he'd sold to. And several of these CEOs realized that Paul had a great deal of knowledge they could use.
As a result, Paul got "Crandall-type" continuing relationships with three smaller companies, working the scattered-day equivalent of one-week-per-month for each. He also secured exclusive distribution rights to a couple product lines within his tri-state area.
The bottom line for Paul is employment. The three consulting activities generate about the same money he was making in his corporate job. But now he has much more economic security. He can lose any one of his part-time deals and still have a good solid income. Meanwhile, his personal distributorship business continues to grow, entirely separate from his three relationships with other companies. Paul has found the best of all worlds... a chance to become entrepreneur of his own small business, while retaining an income from other people's established businesses.
Now let's consider the other way, you may find a job by not looking for one:
Attempting to buy a business.
Here we're not talking about trying to buy a small business. Any $100,000+ executive who wants to exit the corporate arena by purchasing something small...restaurant, store, inn, motel, marina...should have no difficulty doing so, anyway.
No, now we're talking about a big deal...something with annual sales above $5 million, and perhaps $50 million to $100 million or more. Maybe $4 to $25 million is most realistic for an individual to pursue.
You may feel that, for personal fulfillment, you must be at the helm of a sizable business. If so, don't even consider becoming an independent consultant. But don't give up the idea of becoming your own boss, either. If you're a $100,000+ executive, and you're willing to risk whatever money you now have, you can attempt to buy a very substantial business.
Surely you've seen Victor Kiam's TV commercials for Remington Electric Razors:
"My wife introduced me to this Remington electric shaver, and I liked it so much I bought the company."
It's a true story.
And here's one from my own experience, which proves that just about anyone can do a deal. In 1966, newly married and with only $8,000 in my pocket, I raised $350,000 to buy a pair of radio stations (5,000 watts AM and 250,000 watts FM) in Minneapolis-St. Paul, then America's #12 market. Total price of the station was $1 million, with 29% down and the rest earned out over 5 years. Unfortunately, when I met the seller's terms, he refinanced the station and refused to sell it to anyone.
I pursued that deal while happily employed...working nights and weekends on brochures and payout plans, and using vacation days, lunch hours, and a minimal amount of "on-payroll" time for meetings with lenders and venture capitalists. In the process, I found a lot more people in the financial community who wanted me to work for companies they were involved with, than who wanted to put up the cash I needed.
The best job offer was VP - Marketing of a young growth company which had been financed as a startup by the venture capital subsidiary of a famous Wall Street firm. It has since grown to sales of over $200 million, and is listed on the New York Stock Exchange. I would have made a bundle!
Almost all the people I met, even though they didn't provide money, were extremely kind and helpful. Virtually every meeting ended in classic "networking" fashion with suggestions of other people to see and additional ways to further my project. Finally the head of the venture capital subsidiary of a large New York commercial bank suggested I take my brochures and P&Ls to Minneapolis, where my deal would seem larger and more tangible. I did, and immediately got all the money I needed from a local venture capital firm.
Unfortunately, after that deal fell through, I never found another attractively-priced broadcast property, although I did investigate several other businesses...some much larger, but none worth raising money for. However, the fact that, except for the seller's withdrawal of his listing with the broker, I succeeded with the radio station deal convinced me that other people with more sophistication, more money, and more contacts than I had in those days could surely do a highly leveraged deal.
So when I became an executive recruiter several years later, and was asked by clients to do them the favor of "counseling" their senior-executive friends seeking jobs, I began asking the most enterprising-appearing ones why they didn't consider trying to buy a company. To most executives in the early '70s when I first started making this suggestion, it seemed a pretty radical idea.
What happens when you try to locate a company to buy, and try to arrange financing?
Obviously, two things could occur...one a long shot, and the other a certainty:
- You may find the right company, raise financing, and wind up owning much or all of it.
- You will undoubtedly meet and favorably impress lots of influential people, who know what's going on in lots of companies.
Only a few actually wound up with their own companies. The reason the rest were so grateful: contacts made while attempting to do deals led to excellent employment offers with companies the financial institutions introduced them to.
How do you go about identifying a company and setting up financing?
It's far beyond the scope of this book to discuss in detail how to find a company and do a deal for it. However, the basic idea is all you need to get started. To look for a company, there are basically three channels:
Business Brokers
Every major industry has specialist brokers, who advertise in its trade publications. That's how I found the radio stations. Moreover, every major city has general business brokers listed in the "yellow pages." In centers like New York, Chicago, and Los Angeles some of these brokers will know of opportunities all over the country. Most, however, are locally and small-business oriented.
Investment and Commercial Banks, and Venture Capitalists
Bankers... both investment and commercial... are absolutely your best informants on companies to buy, and also your most productive networking contacts toward by-product employment opportunities.
Naturally you'd expect the great investment banks of Wall Street to be tuned in to a huge amount of acquisition and divestiture activity. And they are. Most of their deals, unfortunately, are beyond the participation of individual executives. However, those firms usually have certain members or a department specializing in smaller situations and "venture capital" projects.
Surprisingly, commercial banks in virtually every city are perhaps your best source of leads toward "smallish" companies to buy...properties with annual sales of $5 million to $25 million. And commercial banks also produce lots of by-product employment leads. Most people don't realize it, but every commercial bank, even a small suburban one, has someone...possibly even a department in larger banks...handling the bank's involvement in businesses that are in transition and/or potentially for sale. If your phone call asking for "the head of your investment banking department" gets you nowhere, just ask for the secretary to the President and say:
"I'm an investor looking to buy a business in the $5 million to $25 million range, and I'd like to talk to the person in your bank who has the best knowledge of any such businesses that might be for sale."
Right then...or with a call-back later...you'll be hooked up with the proper person.
Venture capital firms...either independent, or arms of large financial institutions...specialize in financing relatively small deals of the type you might have a shot at doing. Generally speaking, however, they expect you to walk in already having a specific deal you want them to back. You're far less impressive if you arrive empty-handed, asking for both a concept and backing.
However, in preparing this chapter I spoke to one of my favorite venture capitalists, who said:
"Even so, John, don't discourage your readers from checking with us fairly early in the game. If a really outstanding person with the right background came in here today, I've got a couple sick little companies that I might let him or her invest their $100,000 or $150,000 in, and run the company. Or I might have an idea in my inventory that I haven't found the right person for. And of course, if I'm impressed with someone but I don't like his or her deal, I may try to get them to join one of my 'investee' companies."
Owners of the Businesses Themselves
These days, most sizable companies...and even the large divisions of major corporations...have specifically earmarked businesses and product lines that "no longer fit the corporate purpose." Possibly something they're tossing out could be your "chance-of-a-lifetime." Vic Kiam bought the Remington Shaver Division from giant Sperry Corporation. To smoke out such possibilities, write to the Chief Operating Officer of the corporation, who'll probably turn you over to someone in Corporate Planning or Finance.
"But John, isn't it totally unrealistic to imagine that I could raise the money for a major deal?"
No. It's easier to find money to back an exciting deal than it is to find a really attractive deal to seek money for.
However, bear this brutal fact in mind: Whoever puts up the money for something far bigger than you can personally finance is going to want you to put most...and perhaps all...of your personal net worth into the deal. That guarantees you'll try desperately hard to make the venture work. You'll succeed...or you'll probably walk away broke.
And of course you won't own the whole company, if it's a sizable deal. Specific arrangements will vary widely. But here's some idea of how things might go if you finance through a venture capitalist. You and any other "risk" investors you bring in will put up significant money ...maybe 5% to 35% of what's needed. The venture capital firm will come up with the balance (from its own funds, insurance companies, etc.).
The money you receive will be treated as an interest-bearing loan, to be repaid from profits. In addition, the capital firm and its "partners" will get an "equity kicker," outright ownership of anywhere from perhaps a quarter to more than half of the company. The larger the percentage-of-capital you provide, the smaller their "kicker" will be.
Assemble your "nut" of risk capital before you begin contacting the financial community.
The reason I was able to offer the requested down payment of $290,000 (29% of $1 million) to the owner of the Minneapolis radio stations when I personally had only $8,000 way back in 1966 was that I had the backing of Midwest Capital Corporation. In fact, it was Alan Ruvelson, the President of Midwest, who called the owner and told him we were ready to buy the stations according to the terms the owner was asking. I would never have got the backing of Alan and his Board member Leonard Dayton, who was also active in analyzing the deal, if I hadn't had four essentials:
- A deal that made excellent financial sense;
- A manager they believed could do the job;
- A persuasive written prospectus that demonstrated points 1 and 2; and
- A "nut" of risk capital that was at least significant, even if far below the total needed to swing the deal.
Clearly part of my credibility as I wandered along Wall Street collecting helpful advice and employment overtures, and as I ultimately persuaded Midwest Capital to finance the deal, was the fact that people who knew me were willing to risk their own money in a venture I conceived and headed.
Don't even approach the financial community until you've assembled a respectable "nut" you're putting at risk. It can be your own cash. Or it can mostly come from others. And the financial institutions won't insist on seeing your funds until they're ready to go ahead with you. But don't expect cooperation...or even attention...until you can give a reasonable answer to this question:
"How much money have you got?"
Also, don't try my old 1966 numbers. Ice cream cones cost a dime to a quarter then. Now they're upwards of a dollar. Credibility today probably begins at $300,000...maybe $200,000 for a very small deal. Incidentally, today you couldn't touch those AM-and-FM stations I tried to buy in Minneapolis-St. Paul for less than $20 million.
Here's the bottom line. The venture capitalist will want to make sure you've got a large part of your own net worth tied up in the deal. As my venture capitalist friend says:
"I'll listen if a really good person walks in with only $100,000...or even $50,000...as long as the amount they're risking is meaningful to them. But he or she has got to be willing to tie up a large portion of their net worth and their liquidity. And if they don't have any liquidity, they should second-mortgage their home to get some. They've got to show me they're dedicated."
Nobody ever said it's easy to become an entrepreneur!
But even if you fail to consummate a deal, you'll make a wealth of valuable contacts as you attempt to put one together.
Okay, let's assume you're really committed to looking for a business to buy, and you've got a "nut" of money.
Now let's consider the superior quality of the contacts you'll make by "networking" bankers, corporations, and brokers.
The meetings you arrange while looking for a business to buy, and putting together financing, show you off far better than traditional "networking." You're not just another unemployed executive, who drops a familiar name and makes a familiar plea.
Consider these advantages:
Most appointments are NOT granted out of obligation. You reach people in the regular course of their work...not because someone imposes you on them.
You have legitimate business to discuss. You propose a money-making deal...purchase of a business on which a fee can be earned, or a bad loan worked out. You don't display an out-of-work executive to someone who doesn't need one.
Your managerial competence is a real issue. Far from just a tedious obligation, discussion of your managerial prowess is mandatory. Your experience and achievements would be probed even if you didn't volunteer them, because they determine whether you're an appropriate purchaser of a business.
You provide an actual demonstration of your ability. You're in a business meeting. If you've already identified your target, you bring a well-thought-out written presentation. And even if you're still looking for a property, your acumen is demonstrated by your realistic objectives, and your reactions to questions and suggestions.
You arrive with a meaningful endorsement. Your "nut" of risk capital is a lot stronger recommendation than just the dropped-name of a prior networking contact. He or she may not be willing to lend you cab fare to your next appointment. But when you walk in to buy a business, your co-investors in the "nut" are "putting their money where their mouth is."
You talk to knowledgeable, well-connected, and powerful people. Proponents of conventional networking point out that even your dentist or pastor may introduce you to the chief executive of a major corporation. Perhaps. However, if I were the CEO and got very many such referrals, I'd think seriously about changing both my dentist and my religion. Moreover, the CEO's need for an executive isn't something normally communicated to a dentist or pastor. On the other hand, that need may be glaringly apparent to a company's banker, even when the CEO is reluctant to acknowledge it.
When trying-to-buy-a-business results in an employment referral from a banker, it may be even stronger than one from a recruiter.
A financial contact who has no "deal" to suggest knows that the odds are overwhelmingly against your eventually acquiring a company. Therefore, she may try to help a company she's close to by suggesting you as a potential employee. For several reasons, her referral can be even more valuable than a recruiter's:
You arrive without a "price-tag." Unlike an unasked-for referral by any type of recruiter, the banker's introduction carries no $30,000+ impediment.
Your credibility is enhanced. With no fee at stake, the banker has sent you only because he feels you may be helpful. He probably has money invested, and wouldn't jeopardize it by sending a dud.
There's clout attached to the referral. CEOs pay attention to suggestions from their key financial contacts. And if you're referred to a "young growth company," it may even be controlled by the financial institution.
You arrive alone. You're not part of a recruiter's "slate." If you're excellent, nobody will go out looking for further candidates.
Inducements may be offered. You're being asked to forgo your quest for independence. Not being a job seeker, you're not quite treated like one. Chances are, you'll be offered more equity participation sooner than an ordinary candidate for employment would be.
If you've got the sophistication and energy-notice I did not say the money-to try to buy a company when you're job-hunting, there's lots of upside and very little downside to the process.
True, you can't avoid wasting plenty of time and effort, even if you succeed. But you'll also go many places and meet many people you wouldn't have reached in any other way. What's more, you'll fill your mind with executive-level thoughts and your calendar with executive-level appointments, when you might otherwise be huddled with a group of out-of-work executives in an outplacement office, or sitting at home alone...cursing the injustice of the business world and thinking, acting, and looking less and less a part of it with every passing day.
Seeking self-employment is a great idea.
But watch for banana peels tossed in your path... one by outplacers, the other by recruiters.
Before we leave the idea of self-employment, I must alert you to a couple suggestions you may receive when you're in the midst of an all-out job search. Unfortunately, that's just when you're likely to suspend your normal skepticism toward proposals you'd never think twice about when you're happily employed.
Maybe you should buy a franchise. Maybe.
Faced with burgeoning ranks of paid-for-long-ago-but-not-yet-out-of-here outplacees, many outplacement firms are holding franchise fairs, inviting in franchise salespeople, and distributing sales brochures for franchises. There's nothing inherently wrong in telling you franchises exist, or in suggesting you think about buying one.
But is that helping you find a job? Is that what your employer paid to have done for you? How is that better than the newspaper ads the franchisers are always running to lure you to the same spiel they'll give you in the outplacement office? As one national sales manager told me:
"Whenever we get into an outplacement office full of panicky unemployed executives with severance money in their pockets, it's like shooting fish in a barrel."
Of course. Far easier than corralling and pressuring the idly curious who stroll the franchise fair at the Colosseum on Sunday afternoon.
Maybe a franchise is life's perfect fulfillment for you. Maybe. But please, always be careful with your life's savings. And especially when you're uniquely vulnerable...out of work and bracketed between an out-placer emptying an office and a salesperson filling a quota.
Here are two rules for when folks yell, "Invest in yourself!" and then suggest franchises:
- Don't risk your savings when you're unemployed, on something you wouldn't even look at if you had a good job.
- Do work at least one week in a unit of the franchise with-out anyone knowing you might be a purchaser. Put on old clothes...drive 200 miles...stay in a motel do anything necessary...to wiggle your way into a $6.00 an hour job behind the counter or desk of the very same outfit you're about to risk savings and sanity on.
Surprise! We think you're so wonderful that... we'll let you pay us to help you seek an LBO.
Remember those ads headlined: "CAN YOU DRAW THIS?" They asked you to draw a cartoon figure and send it in. If the "panel of judges" approved your sketch, you could then send in your money for a mail order art course. And guess what...the "judges" loved your sketch. At least they didn't hate it enough to forbid you to send money!
In recent years a few executive search firms have come up with something similar. You send them your impressive resume. Obviously you're seeking work. You've had high level jobs (and presumably have money). So they call up and praise your achievements. Unfortunately they don't have a search that fits. But they'd be willing to refer you to their "subsidiary" which seeks "entrepreneurs for leveraged buy-outs." Are you be interested?
Of course!
Stressing that they accept only a rare few special people, the companion "company" is, nevertheless, willing to take a chance on you. They're doing you a big favor, as they'll tell you, because the only way they can ever make money on you is in the very long run. They'll get some equity in the deal you ultimately put together with their help and, in the end, that will pay them for assisting you.
In the interim they ask nothing from you...except that you shoulder half of their costs in advising and helping you. Your "share" usually comes to something between $1,600 and $1,900 per month (so far I've never heard of these outfits reaching for a full $2,000 a month).
I've spoken to quite a few executives who've been sold this scenario. Amazingly most seem flattered to have been "chosen," even though no deal has transpired. (Surely some deals must work out sometimes; I just haven't heard of them.)
These executives all seem firmly convinced that their hired mentors cannot possibly be in the game for a mere $1,600 or $1,900 per month. However, as an executive recruiter receiving about 80 resumes per day I realize that, although truly impressive, these executives' careers are no better than those of 5 to 10 others whose resumes the Postal Service delivers every day. Hence I visualize the mentors banking handfuls of $1,600 checks each month. The executives, on the other hand, think only of their own specialness, and assume they can't possibly have more than two or three siblings in the system.
If you're ever tempted to enter such a deal, bear in mind that you'll never know how many other players are contributing to the pot. Maybe your benefactors are wealthy and altruistic enough to wait years into the future for people like you to finance businesses, buy them, build them, and finally sell or IPO them, before getting paid for today's work. Maybe. But then again, maybe not.
So much for becoming your own boss...and perhaps getting hired instead.
Trying to buy a company is a great adventure...something every red-blooded Ail-American Executive may want to try at least once. It's hard work. But it's exhilarating. And if you're smart and lucky, the rewards can be fantastic.
Perhaps you'll wind up with your own company. Probably you won't. Regardless of the outcome, chances are you'll generate just as many employment opportunities...and probably better ones...than you will with ordinary job-applicant networking.
And who knows? You may find your ideal job by not looking for one.
