June 24, 2017

Will your ceramic business last forever?

CHAPTER  30

This chapter sets the frame for your general approach to how to structure your management of what you should consider as the “indefinite” time line for your ceramic business.

As an owner of a pottery, a teaching ceramic studio, a specialty ceramic studio, a PYOP  (Paint Your Own Pottery) studio, a ceramic distributorship or other ceramic business – your plan from the beginning was to start it, grow it, and keep improving it indefinitely.  But you may not have nailed down exactly what “indefinitely” really would mean for your business.

Ceramics in general can arguably be classified as having little risk of becoming obsolete. After all, it has been an art form and business for thousands of years. So there is little, if any, risk that it will be obsolete as an object for trade. Yet, few businesses, regardless of its niche, survive for unlimited periods of time. .

So, what is the life span for your business?

If you do not plan to run your business for the long term, you should not own it. You need that razor sharp dedication stemming from thinking of a never-ending activity. If you do not have that aim, you will not give your business all you have.

But in reality – and in the back of your mind – there are thoughts such as: “maybe I will be forced to sell one day for some reason” (there are many), or “maybe a buyer comes along offering me a nice chunk of money” or “I hope that members of my family will take it over”.

Over my years of business experience, I have seen many changes of ownership for many different reasons – some that could be anticipated, others that could not be.

A business – whatever form it has –  is a legal entity. As such it has a life forever. When you, your accountant and your attorney set it up, there was surely no indication of a time limitation for its longevity.

Whatever happens in life, a general rule is to be cautious and prepare for as many eventualities as possible. So, think this through realistically and decide to be prepared for a future change of ownership. This is part of your role as the owner.

Things to consider

There is a general, simple rule. Run your business at the top of your ability at all times; make it excellent and be prepared for the day when your business will have a new owner.  

 A small business is always completely depending on the owner. This makes a succession a challenge. In the end it will be your decision whether to close the business or pass it on to a successor. In either case, there are financial, legal and other considerations which you should be aware of.

A few years ago, I was visiting a ceramic studio in one of the suburbs of a major city. While I was standing in the studio talking to the owner, one of the customers in the studio approached us and asked if the business was for sale. I withdrew from the scene and let the owner take over. I tell this true story, because it highlights the fact that you never know when an opportunity can crop up.

Why would your business be an attractive acquisition?

When you are successful you may have friends, customers and even competitors that are looking at the possibility of stepping into your shoes as the owner. But your small business is as closed as a fortress, information-wise, with no real possibility for an outsider to know its size, profitability or the real key to your success. Only you can unlock the doors to that fortress.

Here are a few basic practical and legal matters that would serve you whatever happens.

1. Keep your business vibrant at all times. The vibrancy is in all probability what a potential buyer would be drawn to as a primary reason for being interested in an acquisition. Vibrancy is what an outsider notices first. If your ceramic business is busy and your customers happy, there must a good reason to assume a foundation of financial success.

2. Pay back (or, at least down) debts. A potential buyer would likely not risk taking over any loans or other liabilities. So, work off your loans. This is a good idea whether you sell your business or close it down. But realizing that your debts might prevent a potential sale gives the matter a sense of constant urgency.

3. Look at your long-term commitments, such as your lease, if any. Talk to your landlord and discuss your need to have legal rights to convey the lease to a potential third party. Do it now. Preempt the possibility of the lease locking you in by any difficulty to convey it to a new owner. At the same time, make sure that you have the long-term right to renew the lease. Have your lawyer look over your lease agreement and take the necessary legal steps.

4. Without raising any suspicions, take a look at your employees, if any. If you have a trusted “right hand” – this might be your best chance to capture a potential buyer. If you do not at present – develop one of your employees for that role or, next time you hire, think in terms of someone with the potential to bridge your operation to a new owner.

5. Is your customer service outstanding? Look for the next chapter for thoughts on that subject.

6.  Do you have a quality business? Quality is forever. As the saying goes: “time is on the side of quality”. You need to have quality for your long terms success. I don’t mean just your products, but your overall operation, from, yes, products, to your business’ appearance, how you motivate your employees and your customers and how the public perceives your operation.

7. Keep your records up-to-date. This is just sound management, but particularly important in case you need to show your business to a potential buyer without delay. At the very least, always keep the results from the latest quarter updated and handy.

8.  At the regular meetings with your accountant, ask him/her how he/she judges your business’ attractiveness for an acquisition. It will lead to a valuable discussion.

This chapter will not cover how to sell your business. That is a complex subject which I will deal with later, in chapter 32.

Copyright Protection
© 2011 by Rolf E. Ericson, Oneonta, New York, publisher. All rights reserved. Photocopying, reproduction , copying, or redistribution of any kind in printed or electronic form is strictly prohibited without written permission from the publisher.