New Business Owners Embrace Changes, Risks
PHOTO/Matt Pilon
Barry Charbonneau leveraged his past experience to buy and run his own business in Littleton.
PHOTO/MITCHELL HAYES
Scott Hayward has made lots of changes to the Harvard General Store since he bought it in 2012.
Scott Hayward has changed careers several times, which he thinks might be a key factor in his latest plunge — buying and managing a small-town general store.
Hayward, 62, who since August he has owned and operated the Harvard General store, used to work as an architect for a decade before he switched to real estate development after a recession in the late 1980s. That brought him to Harvard about 15 years ago.
It was the most recent recession that pushed him to make his latest career change. Hayward said he became disillusioned with the real estate market and the declining interest he saw among equity investors. He found himself looking at the store each day from his home across the Harvard common and Still River Road.
"I was able to watch it through its different manifestations over the years," he said.
That included different owners with different ideas for the store. But Hayward had some of his own, and he decided to give it a go.
He worked with former owners Adam and Lyn Horowitz — who were moving back to England after more than five years of owning the store — and their broker, Chris George, to negotiate the deal.
Activity Tempered, But Reasons For Optimism
George, owner of Worcester-based business brokerage firm George & Co., said he was expecting the market to rebound toward the end of 2012 because of the looming expiration of the Bush-era tax cuts, which were passed in 2001.
"And it didn't happen," George said. "Part of the reason for that is there's still too much pain in the marketplace."
That means owners are holding off on selling their businesses because they want to attempt to record a year of strong sales before they get out.
As it turns out, perhaps buyers and sellers weren't foolish to wait, no matter the reason. Just before the year-end deadline in December, as the nation was headed for the "fiscal cliff," Congress worked out a deal for only some of the Bush tax cuts to expire, largely keeping income tax rates the same, while increasing tax rates on estate transfers and inheritances, as well as on capital gains and dividends.
George sees positive signs for 2013. Sale prices that business owners are netting for their companies have crept upward in recent quarters, particularly among larger businesses, valued at $2 million and higher, according to a recent survey by Pepperdine University and the International Business Brokers Association.
However, small businesses valued at less than $500,000 didn't see that trend in 2012. Sales prices as a multiple of company values were stagnant through the end of the year.
The survey found that in the fourth quarter of 2012, for the first time, retirement of baby boomers was the top reason driving business sales in the "Main Street" and "lower middle market" sectors. The second reason? Burnout and family issues.
The survey also found that 56 percent of "Main Street" firms, defined as having values of between $500,000 and $1.99 million, were sold within six months of being listed. And more brokers surveyed believe the market is shifting toward buyers.
Plenty Of Changes In Harvard
Hayward felt like it was a buyer's market when he bought the Harvard store. He knew that not long after the sale, the town would be installing sewer service in the street, which would make food service more feasible.
"I just saw it as an opportunity," he said. "I felt that because the sewer wasn't in and there was a deep recession, that the property was undervalued."
He declined to disclose what he paid for the business.
He also renovated the interior and has since scheduled wine and craft-beer tastings on the second floor. As a past wine hobbyist, Hayward, along with his wine manager, Stephen Haas, are aiming to bring in a unique selection to the store, rather than compete on price with merchants that sell in higher volumes just over the town line in Boxborough. The store lets customers mix 12-packs of beer for an added twist. Hayward knows he needs to make the store a destination for it to be successful.
"It's one of my visions to create a place that distinctive regionally," he said.
In late March, he added lunch service downstairs. That was made possible by a handily-timed addition of the sewer line along the road in February. And it was a big part of his decision to buy the business.
Hayward said he's working long hours. Like many small-business owners, he jokes that it feels as if his business owns him most of the time. Yet there's a lot to learn.
"I want to be a hands-on owner and I'm still not there yet," he said.
But he finds the challenges of his new role invigorating.
"You're working on a vision, just building the business," he said. "How do we market? How can we improve our results on Sundays?"
New Opportunities For Former Corporate Manager
In some ways, Barry Charbonneau is much like Hayward. Charbonneau, 46, is also a career changer. And coincidentally, he also bought his new business in August.
Charbonneau worked as a certified public accountant in Boston and as a corporate comptroller for several companies in the television business. He went to graduate school for a master's degree in environmental science and policy, and was hired by Clinton-based Nypro as director of sustainability, where he worked until late 2011.
"I guess I'd had enough of the corporate world and wanted to do something where I could use my background as a CPA in business and also do something with an environmentally conscious product line," he said.
Charbonneau didn't want to start a business from scratch. He thought it would take too long. So, he began perusing business brokerage websites, and came across something more turnkey: The Stove Shop in Littleton. Its longtime owner, Ken Kelley, sold wood, gas and pellet stoves in the winter, switching to barbeques in the warmer months.
As part of the sale negotiations, Kelley agreed to stay on for three months to assist Charbonneau with the transition. Charbonneau's first day as owner was the state sales tax "holiday" weekend, when he experienced a heavy rush of customers.
"We did probably 10 percent of our sales (for the year)," he said. "It was good and bad planning all at the same time."
He said Kelley's help was crucial in the transition.
"I think Ken has a lot of pride in what he built here," Charbonneau said.
Charbonneau runs a lean shop with just two employees to handle sales and check system specs to ensure a stove will work in a customer's home.
But like Hayward, he plans to expand his business lines after taking input from customers.
Relying On Past Experience
Besides using his financial background to tweak the business's accounting and inventory systems, Charbonneau hopes to put together more of a one-stop shopping experience.
"It's been a lot of analysis of: What did the previous owner sell? What are the margins?" And "What else is out there our customers might want?" he said. "Where do you want to put your money and make sure you still have enough money for next year?"
Customers told him they'd rather buy a stove as part of a total package with electric or plumbing services included, rather than schedule their own appointments with those subcontractor tradesmen.
He implemented that installation package for the first time this month.
Like Hayward, he's working a lot of hours and says there are always challenges and headaches to manage. But he hopes the investment will eventually fuel his retirement.
"Where I saw the value in the company was in improving efficiencies," he said. "And the demographic is very good."
Harry Mink, a broker with Acton-based Alpha Business Group, said he hopes to see more optimistic buyers like Charbonneau soon.
"People have gotten more confidence in the stability of the financial market" after the Great Recession, Mink said. "The activity level is picking up."
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