First, what is meant by an “absentee-run business?” In the world of business brokerage, it means a business that employees run, and the owner is not present or active in the business. The extent of the owner’s involvement might be truly absentee, where the owner lives in Hawaii and occasionally checks the corporate bank account and receives annual income statements. With small business sales in San Diego, this is an extremely rare business structure. Or, absentee most often means that the owner is not working “in” the business daily but still manages the business, even from afar, by watching key metrics, reviewing employee performance, making decisions on insurance and financial matters, etc. While this is still rare in San Diego business sales, this is more likely the type of absentee business ownership that becomes available for sale.
Business buyers often ask us if we have absentee-owned businesses for sale. Even though they don’t come on the market often in San Diego, sometimes they do exist. Some examples of businesses that might be a candidate for absentee ownership are:
Self-Service Laundromats: Sounds easy right? Hire someone to go in once a day to open, then have them come back at night to close, pull the money from the machines, and make the deposits. Other than the fact that the number of laundromats has been decreasing over the last 20 years, the busiest laundromats are usually not located in the best neighborhoods. If you are not mechanically inclined, the machine repair costs can eat you alive, but buyers still feel they are worth pursuing.
Vending Machine Routes: Again, sounds easy. Hire someone to stock up the machines, pull the cash out, and watch the profits roll in. But, it takes many installed machines to justify an employee to service them, and each vending machine can be costly to purchase.
Car Wash: While some business buyers might feel that all car washes can be run absentee, most prefer to avoid having the liability of dozens of employees washing cars. Self-service car washes, the type that you insert three dollars into the machine to use the water and sprayers, are usually easier absentee-run than full-service car washes. Except for some maintenance issues, self-service car washes can be absentee owned. However, given the property values in San Diego, the cost to rent the land/buildings or own the property makes the return on investment potentially low.
Franchised Businesses: Often business buyers ask us what types of franchises are suitable to be absentee owned. Many franchises prefer active ownership, and some prohibit absentee owners altogether. But whether it’s a tanning salon, UPS Store, Firehouse Subs, or any other franchise model, they can technically be run absentee. The key to franchise operations, like all other businesses, is whether or not the business generates enough cash flow to pay all the expenses, including the franchise and advertising fees, pay a manager, and still turn a profit.
While the seller of a business might suggest it’s an absentee-run business, and maybe the business broker promotes it as such, business buyers need to consider the following carefully:
- How much time does the seller really devote to the business?
- If something goes wrong with the operation, an employee doesn’t show up for work, or there is a major customer issue onsite that needs attention immediately, who will get in their car to drive to the business and solve the problem?
- What is your skill set, and how might it benefit the business?
The bottom line with absentee-run businesses is if the business earns enough profit to support a manager to run the day-to-day operations. And in today’s labor market, how much will that competent, take-charge manager cost you?
Vanguard Resource Group has sold over 800 businesses in San Diego, Orange, and Riverside Counties. And virtually every one of those businesses had either an active working owner/operator or a well-paid and incentivized management team in place. And even with the team in place, the owner still was involved in some manner. So a truly absentee business is a very rare find.