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For Tom and Kim McMurtry, buying a business was something of a homecoming.
The couple, who both worked as educators for more than 20 years, was itching to return to Black Mountain, NC, where they owned a home and hoped to retire. They already spent most weekends in the small town, and it was during one of these weekends that an opportunity presented itself: a small gift shop was for sale.
The shop was a chance for the McMurtys to do something different with their lives. With limited opportunities in higher education, owning a business would allow them to do the things they loved while managing their own time. Plus, Tom’s past experience in retail made the store seem like a good fit. Excited by the prospect of a change, the couple spoke with the owner and put down a deposit to take the business off the market.
Doing their due diligence, the McMurtys researched and consulted with accountant friends. They learned how businesses are valued and the goodwill that factors into that value — that is, the inventory and customer base from which the seller profits.
After a deep dive into the shop’s merchandise and goodwill, the McMurtys found the business was actually valued much higher than they were willing to pay — the “for sale” sign had no asking price listed. They didn’t have the financial resources to risk on a business with unclear profitability. After several months of deliberation and examination, they concluded the business wasn’t for them.
Another local business opportunity presents itself
While Tom and Kim were deliberating on whether or not to purchase the business, another shop caught their eye. Tom concluded that if they didn’t buy the first business, they would buy the second immediately if it became available. Then, while grabbing lunch one weekend, Tom walked by that second store and was greeted with a “for sale” sign.
“I immediately stopped in and talked to the owner,” Tom said. “He told me what he was asking [for the business], and I told him we were very interested — and texted a photo to my wife.”
This time around, the McMurtys were more familiar with business valuation and recognized how the shop’s value was tied up in very specialized products — locally-made iron, wood and pottery crafts. The McMurtys, on the other hand, inspired by their travels, wanted to sell goods from Europe. They wanted to sell things that were entirely different from the other shops in town and not have to compete for the same customer base.
While the shop’s goodwill would not benefit them, it had other benefits to support the transition, such as its location.
“For us it was about location, location, location. [The shop is] next to the busiest restaurant in town and in the middle of the historic district,” Tom said. “We knew whatever we did, we could make it successful by bringing in the right product.”
Switching out inventories is a hefty financial undertaking. To offset the burden, the McMurtys negotiated with the seller on certain products and had them agree not to compete for customers for at least a year — since the original owners planned to open a new shop nearby.
However, they still had to get creative with the financing. While they had most of the money readily available to purchase the business, they did take some funds out of retirement to bring in new products from Europe. For the new owners, this hit to their savings was well worth the pursuit of their dreams.
“Our goal was to become a destination store,” Tom said. “[A store] that people wanted to come to our town to visit.”
A new lifestyle brings new goals
It took a year and a half after purchasing the store in 2014 for the McMurtys to learn exactly how their lifestyle would change. Until that point they had been working apart, swapping between weekends at the store and their jobs at the university.
Today, the McMurtys run the store together — full time, six days a week. While they’ve worked closely for almost their entire married lives, Tom attributes their continued success to balancing their strengths. Mainly, Tom bookkeeps while Kim orders products and designs the store.
With their desired inventory in place, the McMurtys have new goals. They want to hire employees and they want to travel to Europe more often so they can find new products. Until then, the couple is always on the lookout for new opportunities to refine their product offerings and profitability.
Tom’s advice for aspiring owners
Switching careers can be scary. But with financial savviness and some old-fashioned diligence, it’s an attainable goal for many. For those aspiring to follow in the McMurtrys’s footsteps, Tom offers the following advice:
- Business valuation is important. You need to know what the business is worth for many reasons. One, so you don’t get scammed. Also, so that when you go to get a loan, you know the proper amount to tell the bank. Inventory and goodwill play a large part in business valuation — don’t just take the owners’ word for it. Consult with experts and do your own research.
- Love what you do. Look at what you’re buying: Is it something you love? If not, then don’t do it. Make sure the business you pursue holds long-term importance. Don’t pursue business just for an opportunity; do what you are good at. There is a fine line between having a hobby and being able to sustain a business in that field.
- Be willing to learn. Business ownership is a learning and growth opportunity, but you have to be willing to make mistakes, and lose money on them. Learn how to make your business better by learning from failures. If you aren’t willing to learn, business will be very difficult because mistakes and failures are a part of the job.
Making a career change raises a number of unknowns, but if you dream of owning a business, don’t let the unknowns hold you back. With the right blend of business savviness and drive, anyone can make the switch and become an entrepreneur.
July 2, 2019 at 11:33AM
Forbes – Entrepreneurs