“What you Focus on Grows”
Finding a buyer for your rural business can be a challenge. Chuck Parmely found a solution.
Chuck Parmely, owner of The Overhead Door Company of Riverton & Lander, has been working in the business since he was 10 years old. At that time, his father owned a glass shop and “dabbled in” garage doors, which Chuck would install after school.
In 1988, Chuck became an owner, a transition he describes as “…scary because everybody is relying on us to make sure they have a paycheck.” He wondered, “Am I really going to know how to make the right decisions? What if I make the wrong decision? We felt we didn’t have the choice to fail…that word wasn’t in our vocabulary.”
There were tough years. Between 1986 and 1988, Chuck moved from Riverton to Casper, Wyoming after the oilfield, uranium and iron ore mines shut down and work became scarce in this area. Chuck took risks to keep the business afloat: “We kept a phone line in Riverton, and worked everything out of Casper.” It was still a tough market in 1988, but that’s when Chuck diversified into glass and windows to stay busy. Chuck said, “I was out in the field doing everything. I was installing, selling and servicing. I had 1 employee.” Business did not pick up until 1990 when the oilfield started coming back.
In 1999, Chuck became sole owner of The Overhead Door Company of Riverton & Lander. In 2007, he set a goal to retire by age 48 and began thinking about finding a buyer for the company. Chuck says, “It was a dream. I didn’t have a plan to make that happen.”
Around that time, a Chuck was invited to a mergers and acquisitions seminar.
Q&A WITH CHUCK
Chuck: We were told they had buyers interested in our type of businesses. It was all a big scam. We gave them $38,000 to do an evaluation of the company, showing us where we could make improvements to make the company better. We tried to make the improvements, but they kept leading us on. We came down to the end of the contract, and they said, ‘We have a buyer, he’s coming out to meet you.’ Six hours later, they said the buyer changed his mind and he’s not coming now.
I went down the consultant road two more times. Some of it was good, but it’s not worth the money. They eat your cash up.* They come in and you pay all their expenses… The first time I did it, I did get a lot out of it, but then things were going downhill again, so I thought I needed a refresher, but it wasn’t worth it.
*Coach’s Commentary: I have coached Chuck since 2009. His comment about consultants grabbed my attention and made me curious as to how he sees the work we do as being different from other business consultants. Here is what Chuck had to say:
“You’re a personal coach to me, you coach me regularly, whereas the consultants, they come in, take your cash, give you some fancy books, then they are gone. There is no help in implementing. I see big differences with your coaching and consulting compared to what they did. I’m a better person and I’m a better business person. I’m better at everything because of the work we’ve done.”
Then, in 2002, I tried to put a golden handcuff on an employee. I gave him 9 shares of the company with the premise he would buy the company from me. That lasted 3 years, then he decided he didn’t want to do that anymore. I had to buy my shares back and got burned again.
After these experiences, I gave up. I thought I would never be able to sell the company. None of the kids wanted it. I just thought I would be working here the rest of my life.
Sabrina: When did you start to see the possibility of something different?
Chuck: About 1 year ago. Scott is highly motivated with his job. That’s when I started kicking around the question of, ‘How can I sell my company?’
I went to the bank and asked, ‘If I wanted to buy my company for $2 million, how much would you loan? They said they would loan 80% of the value of the hard assets.
I asked, ‘How does somebody who wants to get into business come up with $1.2 million to buy a business? If anybody has that kind of cash, they are in their own business. He said, ‘It’s really tough to do.’
That’s when I started thinking, ‘If banks aren’t going to finance the sale of this company, then I have to finance it.’ I started asking, ‘How could I finance it? I need to have some type of a down payment.
I took all of my costs and all of my wife’s costs that the company bears, whether it’s fuel for the car, the truck, wages, etc. I added these costs, then divided the total by 12 months.
Then I considered a loan of $2 million, with a $200,000 down payment and a 10-year note. That amount was less than the company pays every month for our costs.
I thought, ‘Well our costs are gone when we leave. As long as the company can maintain the sales we currently have and our current profitability, then the company can pay for itself.’
Next, I had to figure out, ‘How does somebody come up with $200,000?’ I spoke with financial advisors and accountants. We came up with the idea of a key person insurance plan, which is a full life policy that creates money on it’s own as long as you are putting money into it.
If the company paid for this policy, at the end of 5 to 7 years, there would be $100,000 in that account. So that’s how we grow the cash. When there is $100,000 in that account, we start the process of the buyout. That would be the down payment.
The other $100,000 is coming from ‘the heart of Chuck’ because he is going to gift that $100,000. That would leave a note of $1.8 million and a 10-year payoff. If the company grows it will be paid off faster.
Sabrina: That’s quite a plan. When you had your plan and shared it with financial advisors, I recall you were very discouraged.
Chuck: Yes, they discouraged me because I was taking all the risk. That was discouraging for me because it’s my business and if that’s how I want to sell it, that’s the way I’m going to sell it. There were some hurdles we had to go through to make sure the plan we were coming up with wouldn’t be a big tax burden for me or for Scott. There also were awkward questions that I had to go to Scott and Darla with, such as, ‘What happens if you get divorced?’
There were a lot of ‘what if’s?’ We couldn’t cover them all, but we covered the major ones. I wanted them to be just as comfortable with it as I am.
Sabrina: What’s important to you about selling your company in this way?
Chuck: I want it to be a sale that is going to work. I don’t want the company to fail after I leave because I lose everything then, too.
Sabrina: If you hadn’t come up with this plan, what was the alternative?
Chuck: Work here till I die or close the company and sell the assets.
Sabrina: What is it about Scott and Darla that made you say, ‘Those are the people who could buy this company’? What do you see in them?
Chuck: I’m a hard worker. I start my day at 5:00 every day and I do it because I want to. Scott comes in at 6:00 every morning because he wants to. He’s never been asked to start that early. He has the drive and dedication it’s going to take to do it. He knows the business. He has a lot to learn yet, but that’s what I’m going to be here for.
Sabrina: You promoted Scott a couple of years ago and then he had to take a step back because of some things that happened in the company. He did not seem to lose stride when that happened.
Chuck: He was mad at himself, thinking, ‘I didn’t do it!’ At that time, we were really busy and there was a lot of stress in the company. It wasn’t his failure, it was just circumstances.
Sabrina: What is the impact of this for Scott and Darla?
Chuck: It gives them something to really strive for. It’s taken those burdens off me and put them on them. By burdens, I mean you have 16 other families that need to be taken care of. Scott is young enough that he has a lot of good working years left in him. They both enjoy working here. They are ‘People People.’ I think they are going to do well with the company and they take care of business.
Sabrina: What role, if any, is Profit First1 playing in making this possible?
Chuck: Profit First is going to get us away from our credit line to where we are using our own money and not the bank’s money.
Profit First is working. We are at our goal of 10% profit for the year. Our profit has increased from $53,000 to almost $185,000, so we’ve more than tripled our profit in just a year's time.
I told everybody at the beginning of the year that we are changing our tactics. We are going to ‘Pumpkin Plan’2 this business to where we pick and choose the work we do…it’s going to be the work we’re really good at.
Sabrina: What are some insights you’ve had along the way that you think might be helpful to another business owner in a similar position?
Chuck: You have to be willing to take a risk, and then think outside the box. If you try to do everything the traditional way, you’re going to be held back.
I also had the opportunity to speak with Scott and Darla Mason about their perspective on buying the business.
Q&A WITH SCOTT AND DARLA
Darla: Scott definitely has had the passion for the business from the day he started. I saw the connection between Chuck and him. There was definitely a team there. A few years ago, Scott started coming home saying, ‘We’re going to buy that business.’ I’d say, ‘How in the world are we going to do that?’ At that time our financial situation was such that we couldn’t even buy a home.
Scott: I’m a company man. I’ve always taken care of the companies I’ve worked for…but not like this. There’s a passion that has grown inside me for this place. Not just for Chuck, but for the company more than anything. I love what I do. If you love what you do, you come to play, you don’t come to work.
I enjoy the customers I work with. It feels good to be Pumpkin Planning the business. There’s a sense of relief because it takes away the pressure of feeling like, ‘I’ve got to get this customer . . . they will make me $10,’ when you know that is not your goal and not why you went into business.
Sabrina: When Chuck first presented the opportunity to you to buy the business, what thoughts went through your head?
Scott: I can’t afford it. That’s a lot of money. How do I get there? What do I need to do? How do I save enough money? I didn’t ask myself ‘Why?’. It was just ‘How am I going to do this?’ ‘What do I need to do to get there?’
Coach’s Commentary: Notice that Scott immediately shifted his thinking from self-doubt to asking “How?” questions. The ability to shift one’s mindset from negative self-talk to asking “How do I…?” questions is a strategy used by successful leaders.
Circumstances in Darla’s life led to her to join the company last year. . .
Darla: One Friday evening last December, I realized I was going to be resigning from my other job and I was wondering what was I going to do. Chuck and Scott said, ‘Come work here.’ All of a sudden that stress from the other job just went away and I knew this is where I am supposed to be. This is exactly what God has planned. When I resigned from my other job, Chuck and Scott said, “Well, you need to come over and interview.” I think Chuck was concerned about how Scott and I would work together. I was interviewed by several employees, including Scott, who then made a recommendation to Chuck. I started the next day.
After I’d worked here several months, Scott told me that Chuck and Cynthia, wanted to meet with us at their cabin. I thought it was about them becoming partners, not about us buying the business. It was a wonderful spiritual meeting, the four of us discussing the possibility of a plan. It was very obvious Chuck had thought this out months before. Chuck made it a very simple plan for us to follow as in, ‘We start here and here is how we are going to get to the point of becoming owners.’
Another gathering occurred at the cabin shortly after the initial meeting.
Chuck: I got a bucket from Home Depot that says “Let’s Do This” and in it, I put a gift certificate to Sweetwater Garden for $200.00.
At the beginning of the meeting I put the bucket in front of Scott and Darla with the “Let’s Do This” facing them. I told them I want this night to be memorable:
‘Remember, what you focus on will grow. I would like you to go pick out a plant or a tree. Plant it in your yard so that whenever you look at it you think of this night and this adventure you are about to take.’
We then went through the basics of our agreement line by line. I answered their questions until they understood and were comfortable with it. It was 12:30 am before we stopped for the evening. We were all pumped! We are all very comfortable with this transaction. The next day, Scott and Darla picked out a tree and planted it their front yard.
Scott: We looked at each other and said, ‘Let’s do this!’ It was an easy decision.
Darla: I am still amazed at the blessing and the gift.
We believe in God’s plan. But in order to get there, you do have to become humble. Don’t take anything for granted. Every day you give 100%. To me, all of the passion and love Scott has for this business is being rewarded.
There are other individuals in this company who have the opportunity to take this business. The fact that Chuck has the confidence in Scott…and with me joining the company…I am grateful for this opportunity to work towards buying it.
1 The Profit First System is utilized by Tap the Potential clients to increase profits by 100-300% or more in just 18 months. The system is detailed in the book, Profit First by Mike Michalowicz.
2 Tap the Potential clients use the strategies outlined in The Pumpkin Plan by Mike Michalowicz to streamline and scale their businesses around serving their Ideal Customers. This results in fewer headaches for the owners and employees, along with greater profits.
