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By Marton Dunai

Ten years ago, Steve Larson bought a job.
And now he's sold it.

In the mid-1990s, the Japanese economy was going downhill, and Larson's employer, the industrial giant Hitachi, was awash with layoff rumors. Then 55, the marketing specialist decided he wouldn't wait for the ax.

"I was invested enough so I could retire, which I did," he said. "But soon I became restless."

Knowing he'd have trouble getting hired anywhere; he contacted a broker and bought a medical supply store in Walnut Creek. He kept it chugging along for 10 years, eventually pulling a six-figure profit. As planned, when he became eligible for full Social Security benefits at 65, he called it quits again and put the store back on the market. It belongs to another man now, and Larson is in his last days helping out with the transition.

As the boomer generation of business owners gradually retires, a huge number of businesses are likely to exchange hands this way, said Ron Johnson, the agent who helped Larson buy his shop originally and now assisted in its sale.

Already since January, Johnson's San Ramon-based ABI Business Sales Inc. helped broker eight deals. Agents normally do less than that in a year.

At any given moment these days, at least one in 10 businesses are for sale, Johnson said.

Some studies put that figure at one in five.

That "business for sale" signs don't hang everywhere like real estate sale notices is because this marketplace is invitation only.

"Business owners don't want anyone to know that they are selling," Johnson said. "Not the employees, not the customers, not the competitors, not the vendors. So you're trying to sell a commodity without telling anybody about it."

The broker usually posts a generic notice in newspapers and on Internet bulletin boards. It's vague, like this: "Castro Valley, CA, automotive business, income 250K/yr, for sale."

The agent releases documentation only in exchange for a nondisclosure agreement. If potential buyers make an offer, the sale then gets under way, typically secret until the last moments
A healthy economy favors selling businesses, Johnson said. They make profit, which makes debt service easier, so sellers can ask for higher prices. Buyers are optimistic, too, and don't mind paying for profitable ventures.

Still, Larson's success is not that easy to replicate. Buyers abound, and most find nothing to fit their ideas. Many sellers have trouble getting rid of underperforming companies. Of the businesses for sale, only one in six finds a buyer. The rest close down and disappear.

For people like Larson it's an investment decision, a good way to turn their savings around one last time before retirement. They look for a good safe return, not just making some money along the way.

Larson had enough to invest but not enough to throw away, he said. He wanted to find a business with an established customer base, selling something people rely on.

"I wanted something unlike art," he said. "Something that didn't depend on discretionary income."

Diablo Medical Supply, a small shop selling wheelchairs and other equipment in Walnut Creek, was just that something. The area is home to an affluent and aging population, Larson noted.

"These people don't wait for the government or the state to give them health care options," he said. "If they need something, they go out and get it."

He bought Diablo Medical Supply with a $400,000 Small Business Administration loan and
$100,000 in cash, then set out to overhaul the operation.

He terminated unprofitable contracts that brought in revenues but not profit. He refocused on direct retail to local customers, and virtually abandoned services. "Hospitals and insurance companies," he said, "they required a great deal of baby-sitting."

Retail also required replacing most of his six workers. Eventually he fine-tuned his profile to quality products such as high-tech, lightweight wheelchairs, advanced beds or armchairs that help people stand up

It worked. Taking in nearly $250,000 a year, he knew his old agent would gladly represent him when the time came to sell.

The paperwork, buyer search and negotiations would take the better part of a year. After a couple of rounds of appraisals, the agent, Ron Johnson, set out to search for buyers. Four false leads later, he found one late last year in Walid Kazak, a successful serial entrepreneur from Michigan.

Kazak paid a little less than $1 million. A 3.5-4.5 multiple, compared to yearly profit, is normal for this size of a business, Larson said.

"You'd always like to have more, but there's a big difference between a businesslike response and an emotional response," he said. "You have to differentiate those, and a good broker should know exactly where that middle road is."

Kazak jumped at the opportunity, although he knows little about medical supplies. He started new businesses so many times, though, that he didn't hesitate.

As a fresh engineering graduate in 1970, he was forced into business when his father passed away, leaving him with a family of nine to care for.

"I bought some land, built a convenience store, and ran it for a few years," Kazak said. "My family helped. Then I sold it, and started a new one."

Gaining more and more confidence in building and selling businesses, he repeated the cycle 10 times before he grew tired of Michigan and convenience stores. Now 58, he joined his brother in California, moving first to the Central Coast, then to the Bay Area, searching for business opportunities. When he saw the listing for Diablo Medical, he knew he found what he was looking for.

"I like this business," he said last week, taking a break from sizing the place up and learning the ropes from Larson. "I already decided to remodel. I have ordered for shelving, I'm changing the racks, the front room. A couple of months from now, you won't even recognize the place."

He grew more enthusiastic as he spoke.

"I'm going to expand this business. I enjoy seeing progress. I'm not the kind of guy who sits back and says he's happy. Believe me, in 10 years I'll have three or four locations around the Bay Area."

Then what?
He will sell it, he said, hopefully at a handsome profit.

This article was originally published in the CONTRA COSTA TIMES, March 15, 2007 (Business Section).

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