Article


A Tale of Three Business Owners
How not to sell your business
By Donald Feldman
Date Published: 1/1/2017

 

Editor’s note: When Don filed this essay in June 2015, the economy was coated in a syrup of lethargy. Now in 2017 optimism seems to be breaking out all over, while interest rates remain low. What better time to revisit Feldman’s thoughts regarding both the motivations and tactics involved with selling a business?

Note: The following is based on actual case histories. The names have been changed to protect the guilty.

Antonio Tubal graduated from college as an electrical engineer and went to work for a large manufacturer of commercial refrigeration systems. Tubal spent several years working in the company’s division that designed and manufactured air conditioning systems for large industrial/commercial facilities. Tubal was very good at what he did and began moving up the corporate ladder. Part of Tubal’s job was going out into the field and supervising the installation of the A/C systems while the buildings were under construction. He noticed that the construction contractors always had a hard time installing the control system to regulate the coolant flow at the juncture where the coolant piping and electrical wiring came together. So, he designed and built in his garage a special junction box that could be used to facilitate the installation, and he gave it to a construction contractor for free. The contractor loved it and asked Tubal if he could get a dozen more. 

Three years later, Tubal had left his job, patented his product, was building “junction boxes” full-time, and had over $500,000 in sales. Tubal had a unique product that commanded gross margins over 50% and no competitors. Major building products manufacturers thought the market too small to attempt to crack. Eight years after building his first junction box, Tubal’s company was doing $4 million in sales with a bottom line of over $1 million.

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