The Green Condor
Hello $wanigans! Thanks for checking out The Green Swan. Today I want to give an update on my small business venture with my siblings. For the sake of everyone’s privacy and to avoid calling it “my small business venture” all the time, I’ve coined the name “The Green Condor”, or “Condor” for short, to reference the business.
Why The Green Condor? No real good reason. Green I suppose just to keep with The Green Swan theme and Condor because it is an awesome bird making a phenomenal comeback after being extinct from the wild as of 1987. It has the largest wingspan on any bird at over 10 feet! Its resurgence in the wild and large wingspan is something I’d like for our business to achieve…strong growth and over time developing a larger and larger wingspan as we grow and become more acquisitive!
If you missed my initial discussion on the Condor, check out My Small Business Investment.
So I have just a few things to update everyone on with this post:
- The acquisition formally closes on August 19
- Business performance update
- Regular operating update calls
- Relationships with my siblings
So let’s jump right in!
After a long closing process, we are almost there! The acquisition will close tomorrow. One of my siblings, James, will be there in person to complete the process. He will be the sibling primarily responsible for operating and running the business. There have been countless documents to sign, a few that had to be notarized, and also the other legal aspects such as creating LLCs, operating agreements, checking accounts, etc. Thankfully all of that is done now and we are setup and ready to go. Everyone is excited to get into it and start ramping up!
James and my other younger brother, Jon, met and formally announced the acquisition to the employees a few weeks ago. They said it couldn’t have gone any better. The current owner was very gracious to us when making the introductions and will be very helpful in easing the transition. And when James and Jon met with the employees in small groups later on without the current owner, the employees couldn’t have been more excited about our plans for the business. As previously mentioned, the current owner has not been in good health and he has lacked focus and energy on the business. With us as the new owners, we will give the business new direction with growth plans that the employees were thrilled about and in complete agreement with. The introductions went great and from the sounds of it the employees are just as eager for the acquisition to close.
I sent my wire to the business at the end of July. I was in the process of liquidating the necessary funds throughout July, as I outlined in My New Target Allocations which went fairly smoothly. Rather than selling a whole bunch of my mutual funds at once, I spread it out in $10K to $20K increments throughout the month. I must admit, the Brexit at the end of June vote scared me pretty good! At that point, I hadn’t started to liquidate anything yet. You can imagine my nervousness as the market dropped precipitously in the following days after the vote. Fortunately, they bounced back just as quickly and continued to climb throughout July. All-in-all, it was not a bad time to liquidate a portion of my investments.
It would be fun to celebrate the closing of the acquisition with all my brothers. Unfortunately we all live in different cities across three time zones. While the next chance we will all be together is in just a couple weeks for my older brother MJ’s wedding, I think we will focus that celebration on his special day.
Business Performance Update
Not the best news to report here. Unfortunately business has been really soft through June with revenues off ~12% compared to the prior year period. We haven’t seen July numbers yet. This was a huge concern when we saw this. We all wondered what the current owner was doing! We had tons of questions we needed to bounce off him and this is what we ultimately found out:
- The business is weather dependent (we knew this part) and that was the primary driver to the decline in revenue.
- While they had lost a few technicians, the owner assured us that no business was turned down due to inadequate staffing.
- This degree of revenue decline has been experienced once before a few years back (also due to weather). In that year, the back half of the year was strong and more than offset the initial decline.
This helped provide us some comfort, but we still had concerns which we clearly communicated to the owner.
- We wanted to remind him that per the purchase agreement the business needed to continue to be run in a similar manner with appropriate staffing. We urged him to make staffing a priority and within a week he was able to find and hire a new, well qualified tech. We felt good about this.
- We wanted to renegotiate his consulting agreement for which we have agreed to pay him $200K, a meaningful piece of the overall purchase amount. He obviously opposed this. Eventually we were able to come to an amicable agreement, basically where we would cut it in half to $100K if 2016 year-end revenue didn’t meet a certain level. This tests him and his belief that the business will bounce back just like prior years, while also recognizing he wouldn’t be able to sell the business as much today based on 6/30 financials as he was when we agreed based on 12/31/2015 financials.
Regular Operating Updates
As mentioned above, us four brothers all live in different cities across the country. Staying organized and keeping everyone up to date will be a challenge. This is especially important early on in this process and after acquisition closing given the number of moving parts and things to address with Condor.
James and Jon are owners, but also are more involved in the day-to-day operations while MJ and I are just owners. So one of the challenges are keeping MJ and I up to speed on all important issues and decisions, but not bogging us down in minutia that we don’t have time for.
What we are doing to primarily address this is keeping a file of things to address, color-coded based on priority, and updated as things are resolved or new items are added. Not only is this file available for all to see (saved securely in the cloud), but we have weekly calls on Sunday to discuss. Given how busy we all are in our daily lives, the challenge here will be keeping them as efficient as possible.
While this will always be a challenge, we hope weekly Sunday calls will suffice. We’ve started this already, but given how hectic things have been at times we have sprinkled in a few spontaneous mid-week calls in the evenings.
Our Relationships Are Priority
The other major challenge that will be ongoing is keeping things amicable between all of us. A number of issues have and will continue to be addressed to avoid conflict. While a few sensitive issues have already come up, keeping communication open and honest has helped. And fortunately, when conflict brews between two of us, the other siblings are there to help mediate. All-in-all, we do not have any challenges in being frank with each other. Growing up together over the last 20 to 25 years, we’ve encountered a lot together and have plenty of experience in conflict resolution…for better or worse.
Us four are close and I don’t see anything ultimately coming between us. Famous last words though right…? This will take work and everyone’s attention. And as mentioned in the previous post on Condor, my ownership interest is unique in that I may want to liquidate in 5 to 10 years as I move into early retirement. This has been built into our operating agreements and everyone understands my situation.
Do you have any thoughts on Condor? Do you think we managed the sales decline appropriately? Any tips to help us keep our weekly updates as efficient as possible? Let me know in the comments below.
Thanks for taking a look!
The Green Swan
Work Harder, Work Smarter, Retire Earlier and Find Your Beach