The chance to buy a business kind of fell into Ryan Berreth's lap.
Several months ago, his 60-year-old father, Bruce Berreth, was looking for something to occupy his time after retiring.Bruce was presented with the opportunity to purchase a local sprinkler company, Sprinkling Columbus Inc. He thought the company would be overwhelming for him during his retirement and declined the offer.
But it was perfect for Ryan.
In high school, the outdoors-inclined younger Berreth had installed sprinkler systems with a friend during summer breaks.
So in February, Berreth left his job as a sales consultant and project manager at a local materials contracting company and became the owner of Sprinkling Columbus — now known as H2OME Irrigation Systems.
The deal was facilitated by Kevin Wilkerson, owner of business brokerage company Vail Business Associates.Wilkerson said the way potential buyers come across opportunities isn't always through obvious means.
"A lot of times there are businesses in the pipeline that aren't on the Internet," Wilkerson said.
Simply by talking to people — which is how things got started between Wilkerson and the older Berreth — can help prospective buyers find a business that fits well, he said.
Passing it down
Wilkerson said when buying or selling a business, the broker — if one is involved — and both parties must follow a process. This includes collecting business information, screening potential buyers and introducing both parties.As for buyers, Wilkerson said they should make sure they have a passion for the particular business.
They should also examine the financials of the business to make sure it generates enough cash to pay for debt service and a desired salary.
And prospective buyers should find out why the business owner is selling it.
Donnie Coppedge wasis Sprinkling Columbus's founder, and was owner for the past 22 years. Before retiring, he wanted to find someone who would continue the business.
Berreth got the green light. But before he could take the reins, Coppedge wanted to ensure a smooth transition.
The two agreed to have Coppedge stay on board for 40 working days so he could inform customers and introduce Berreth to them.
"It was a smart part of the agreement because, hey, I'm the new guy," Berreth said. "There was a fear we'd lose half the clientele if they found out the company had been sold and bought by somebody else."
Coppedge sent out a spring newsletter letting people know he was retiring, and that he had found Berreth to take over the company.
Most of Coppedge's customers have stayed, Berreth said."It's a myth to think customers are tied to the owner," Wilkerson said.Rather, they're tied to quality, he said. And if the new business owner continues to offer quality products or services, then customers will most likely stay.
Growing the business|When it comes to buying a business versus starting one from scratch, Berreth and Wilkerson said there are both pros and cons for each.
When buying a business, Wilkerson said, "The buyer has to be comfortable with the fact that because they're buying cash flow, they may have more debt initially."
Legal and other fees can make that price tag pretty steep, Berreth said.
But buying into a existing business that's already successful shows it's a proven model with an immediate cash flow, established customer list and reputation, Wilkerson said.
"There's no way I would've picked up 300 clients on my own had I started it," Berreth said. "No way."So does Berreth think he made the right decision?
"For someone who wants immediate business, immediate volume and immediate results, yes," Berreth said. "That's what I needed."
It has been about five months since the deal's close, and Berreth has a vision for H2OME Irrigation Systems.
In the first three years, he wants to focus on the company as a service and repair business.
Later, he'll get into installation. By that time, Berreth hopes to have an installation crew.
In the meantime, Berreth said the business has definitely been keeping him busy.
“’Tis the season," he said.
Wilkerson said some people may be afraid to take on the risks of buying an existing business like Berreth did.But sometimes you have to take a leap of faith, he said.
"If you try to remove all the risk of starting or buying a business, you'll never buy a business," Wilkerson said. "At some point, you've got to jump."