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Chaos and Opportunity - Durham and the I-70 Corridor

Chaos and Opportunity: Durham and the I-70 Corridor

The list of things that keep business owners up at night is long and constantly changing. Rising costs, employee turnover, equipment breakdowns, bad weather, taxes, and a thousand other worries keep Ambien sales brisk.

Then, comes the letter from the city announcing a major road construction project that will completely disrupt traffic, frontage, and access for the next, ohhh, three or four years.

That’s exactly what happened to hundreds of companies in the Durham, N.C. I-70 corridor thanks to the construction of the “East End Connector.” As the bulldozers appeared, merchants found their customers struggling to navigate “scenic routes” (detours) GPS devices were rendered useless, and vendor deliveries became hopelessly mired in a sprawl of concrete barriers.

Bottom lines turned as red as the new flashing stop signs. With scheduled completion still years away, many companies are facing a bleak future. Some will call it quits.

Change is part of life, and growth requires infrastructure. But, chaos usually accompanies that change. The good news is that there is also opportunity within that chaos. It’s one thing to try and sell a distressed business. It’s an entirely different matter to consider selling a business that is temporarily disadvantaged, but with an end game scenario that ultimately adds value.

In other words, brutal traffic conditions due to temporary (albeit multi-year) construction projects will ultimately (usually) result in better access, improved flow and increased traffic capacity. What looks like chaos camouflages the opportunity for future cash flow growth.

Those companies with the assets and pain tolerance to stick it out can look forward to brighter days. After all, major infrastructure projects have completion dates. Floods come and go. I-70 will come and stay.

Unfortunately, some businesses may not have the resources or patience. For these companies, selling or closing may be the only option.

Valuation is fundamental to buying and selling businesses. When constructed by a qualified business broker, valuations are designed to unlock the TRUE worth of a company. So how do you value a business with short term impairment but long term opportunity? How do sellers turn lemons into lemonade?

The following six steps are important for any business considering a sale amidst the chaos of infrastructure renewal.

Advice to sellers:

1. Think Globally

Find a broker that can access the population of buyers that appreciate long term risk vs reward. Investing in a business impaired by floods may seem like a bargain right up until the floods come back. Smart buyers understand the opportunity of infrastructure improvement. But, they may not be next door. People from all over the world are investing in growth areas like the Raleigh Durham area. This is true for any size business. The chaos of renewal in downtown Durham is a great example. Entrepreneurs understand the value of early entry. Putting up with a little North Carolina construction dust may seem like a good idea to a successful California business owner who still can’t afford a house.

2. You Snooze You Lose 

There are lead times involved with any business transaction. The opportunity to sell a business can sometimes depend on timing. If a buyer smells opportunity that is dependent on the future state of a business, it may not make as much difference what the business is as much as its availability. This is known as the “Field of Dreams” phenomenon. If you list it, they will come. You can’t sell if you don’t list.

3. Build a Case

Nothing tells a business story better than numbers. Huddle with your accountant or broker and crank up Power Point. Get the numbers clean. Crunch the preconstruction P+L. In valuation, one time charges are typically not included as part of the long term profit profile of a company. A strong case supported by prevent financial performance can go a long way towards characterizing construction impact as a non-recurring condition.

4. Know the Plan

Drill into the details of proposed infrastructure projects. Most county projects are detailed on websites like ncdot.gov. This is public information that is key to determining the future landscape of your business. Civic road projects are always supported by demographics, and projections regarding traffic patterns and volume. Leverage that knowledge to make your case.

5. Stay Realistic

No matter how attractive the possibility of future cash flows may be, the reality of the marketplace trumps irrational expectations. By their nature, buyers are risk averse, and low ballers will be quick to dispute the speculative nature of future cash flow growth. (Which underscores the importance of a broker’s ability to market to the right buyer population.)

6. Clean House

Don’t let the road grader dust turn your business into an eyesore. Keep your customer facing spaces as clean as possible, Refresh your stale merchandising footprint. Don’t let outside influences define your business. A prosperous look is important for customers AND potential buyers.

There ARE buyers who understand the risk/reward calculation for businesses caught in the midst of temporary renewal projects. Visionary buyers are sometimes hard to find. But ask yourself why Cracker Barrels are ubiquitous on Interstate exits. You can be sure they were in the game long before the freeway cement dried.