We Almost Bought A Business 2 Weeks Before the COVID Shutdown. Here’s What Happened…

The past 3 months for my family could have been very different. Earlier this year, it seemed nearly inevitable that my wife and I would be business owners come March 1st. Two weeks later, our new business venture would have been closed by the government for what turned out to be three months. It would have been 3 months of filling for the Payment Protection Plan (PPP) and scrambling to survive in possibly the worst possible scenario for new business owners. I’ve held off from telling this story for quite some time to protect the seller, but with the business officially sold to someone else, I can finally share what turned out to be a crazy learning experience.

How It All Began

In June of 2019, a local business owner approached me and then later my wife about purchasing their business. My initial response was an excited, “Woah!” From day 1, I was all in. At the time, I was working part-time at the gas station, Kwik Trip, desperately looking for another job. This was just what I wanted-the chance to be self-employed doing something that would make a difference and engage all of my gifts and talents.

It was a surreal feeling to be contemplating buying a business. I never imagined being in that position and quite honestly knew nothing at all about how to approach the process. I knew I couldn’t let emotion get in the way, but I will say, “I WANTED IT BADLY.”

I immediately went full-time at the gas station and began applying at other places that would pay better. If this opportunity was going to work out, I knew we were going to need as much savings as possible. I didn’t want anything to get in the way of the chance to be a small business owner.

In July, we got to learn of the initial asking price and talk about the details of running the business and the all-important books. It was both exciting and scary, but mostly exciting.

The Negotiator

It became clear after my first conversation with my CPA that price negotiations would be absolutely needed. We also learned early on that valuing a business is an inexact science. The buyer will always value it differently than the seller and placing monetary value on things such as goodwill and client retention is nearly impossible.

To make a long story short, we negotiated and discussed different options off and on for over 6 months. There was no rush to sell and no rush to buy, but the uncertainty of it all was taxing at times. 

Finally, in early 2020, we were ready to move forward with finding funding and hashing out the details of the agreement.

Things Fall Apart

By early February, we were ready to start committing to more hard deadlines. We settled on shooting for a March 1st purchase date and hoped to have all the details of funding, purchase agreement, and transitioning completed in the month of February. Everything was falling into place and important questions were being answered. Most days it felt like the absolute right thing to do.

I began doing more intensive research into being a business owner. I interviewed 3 different business owners to talk about owning a business and about what to be looking for as we went through the decision process. The conversations were exciting and illuminating. The more I learned the more intrigued I was by the possibilities of the business.

As more details fell into place, we needed to do our due diligence by hiring an attorney and reconnecting with our CPA. Those conversations are what led to the deal falling apart for us. We had read the lease agreement and analyzed the bookkeeping very extensively on our own, but we needed to involve professionals in the process.

Our conversation with our attorney was a turning point for us. We knew the commercial lease was lopsided, but we didn’t truly comprehend how much risk commercial leases place on tenants. As our attorney explained the lease, we realized the risk of the business went beyond just the funding we were putting forward to make the purchase. As it turns out, the lease, not debt, is often the small business owner’s largest liability. Coming to this understanding left a huge weight in my stomach that could not be ignored.

The following day we were supposed to sign with the bank for the funding. In an odd twist of fate, a bank error caused them to need to reschedule the signing for a later date. We could still have the funding before March 1st, but we weren’t committed to it.

The next day I reviewed the details with our CPA and he unequivocally felt we could not complete the deal as is. He shared many of the same concerns that we had related to the lease and different aspects of the purchase agreement. By the end of that week, the middle of February, the deal was off, 2 weeks before we expected it to be official.

Not much more than a week after the negotiations fell through, the stock market coming off its February 19th highs had its first coronavirus crash. By March 15th, much of the economy was shut down including the business we considered purchasing.

A Master’s Course in Business

Over the 9 months of deliberating the purchase of the business, I feel like we took a Master’s course in Business. We examined an industry and studied it as deeply as possible. We engaged in hands-on business negotiations. We took an in-depth look at a business’ finances and operations. The hours and hours of deliberation and analysis to truly evaluate what we would be getting ourselves into was incredibly educational and beneficial. It forced us to ask the tough questions, “What do we REALLY value?” and “Are we ready for a long-term commitment to this business?”

The amount of hands-on experience we got was truly incredible and I am so happy I got to experience it. In the end, I deeply wondered if I truly wanted what I thought I wanted. When the deal fell through, there was certainly a sense of relief to know that I wasn’t committing to this task of running a business. This may have been a reaction simply out of fear, but I actually think it was more out of accepting reality. In reality, I want to be self-employed, but I don’t want to be managing employees and customers. I’d rather be writing, making music, and sharing my passions with others. 

In the height of the COVID-19 economic shutdown, I couldn’t help but visualize what my life could have been like if I was a small business owner. I have no doubt we’d have made it through it, but I can’t be positive that it wouldn’t have crippled our business potential from the very beginning. The end result could easily have been ugly as we would have been faced with the worst possible situation two weeks into opening the doors to our business. I do feel blessed to know that I didn’t have to personally go through that hardship, but it also allows me to have incredible empathy for the many small business owners who had to face the realities of the last 3 months. My heart goes out to all of them and I pray they found it in themselves to be resilient and innovative in a time of incredible challenges. I’m not sure I would have been up to the challenge myself.