Sell Your Company. Keep Your Compensation.
Steve Healis sells the Los Angeles division of his janitorial company he had owned for 13 years to the husband and wife team of Cosie and Susan Costa that managed it for six years. The purchase price is financed for 10 years, and a royalty of 5 percent is collected. The company doubles its revenues and quadruples its profits in the first five years. As a result, the royalty is reduced to 4% and the loan paid off three years early. Over the next seven years, Steve meets with the Costas only monthly to review results, set goals and share experiences. Steve maintains his full compensation, plus all company perks, enjoying “retiring” with new time for family, travel and building new companies.
Passing the Baton, Round Two
Steve Healis sells the two Orange County divisions of his janitorial company to the managers who ran the division for five years. The purchase price is financed for 10 years, and a royalty of 5%t is collected. One of the companies struggles during its first two years, and Steve realizes the buyer might not be ready for company ownership. Steve then facilitates the sale to the owner of the other company in Orange County, passing the baton a second time. The combined company completes a seamless transition and has since increased revenues and profits. It revamps its operational model and adds two powerhouse sales and customer service people, further enhancing its success potential.
Baton Mentoring
Steve Healis sells the Inland Empire division of his janitorial company to Tina Tullo who had managed it for six years. The purchase price is financed for 10 years and a royalty of 5% is collected. Subsequently, the company increases revenues and profits and purchases another janitorial service. Steve continues to mentor the owners during monthly lunches with the owners to compare notes and share success stories.
All in the Family
Tina Tullo, who purchased the Inland Empire division from Steve Healis, uses Pass the Baton to transition her business to her daughter, Leslie. Tina remains involved in the business on a limited basis, giving her more time to travel to the Philippines for extended periods of time. She realizes that Pass the Baton works well to provide an arms-length transaction when selling all or part of a company to a family member.
New Twist on Baton Partnerships
This success story illustrates how an owner can sell to a distributor, leveraging the distributor’s trucks, warehousing and inventory, and therefore, reducing overall costs.This paper and chemical supply company — founded by Tom Poston in 1989 — was sold in 2003 to the managers selling its products. As part of the negotiations, the managers established their own companies, allowing Tom to retain his corporation, compensation and perks, as well as dramatically reduce his work schedule. Pass the Baton facilitated the transition and negotiated a 14% royalty over 50 years. This has allowed Tom to put his children through college and have the time to enjoy his semi-retirement.
Extending the Baton’s Reach
This international transaction is a case study in selling the company to a non-employee, but a key individual. A US company wanted to sell its offshore computer programming division. Pass the Baton facilitated the stock sale to a senior manager from Lending Tree, who had substantially and successfully increased revenue and profits. With minimum involvement, the US-based company benefited by collecting a Baton Partner royalty resulting from the increased sales. The new owner made management changes and other modifications with the minority owners in India, boosting morale and enhancing recruiting. The new owners just moved into a new office – triple the original office space — in order to handle the rapid growth.