Liquidation as an Exit Strategy? with Matt Gallivan
Ed recently spoke to a business owner that said, “You know what, they’re going to carry my dead body out of here. And what I want my family to do with this business is liquidate it.” To that business owner, Ed’s got a big surprise for you. Matt Gallivan of Gallivan Auctioneers and Appraisers was on the show. What they were going to talk about was, if that’s your exit strategy that you want to ride the ship down, and when it’s over, it’s over and liquidate the equipment, perfect, that is a fine strategy as long as that is a conscious strategy as opposed to something that you’re going to spring on everyone after you’re gone.
Enjoy this conversation with Matt Gallivan!
1:21 – Can you talk a little bit about what Gallivan Auctioneers and Appraisers are up to?
2:15 – Can you talk about your success plan now that you’re taking over from where your dad left the company?
5:23 – Do you have brothers and sisters in the business too?
6:02 – Explain the chant, what’s that origin? Why is it used and what’s its purpose?
8:06 – Do you offer every type of auction available?
8:36 – How does online auction work for you?
11:35 – Do you use the English Auction more often because it’s what people are more familiar with?
13:55 – What’s the point of auctioneer’s involvement other than marketing and exposure in an auction?
16:00 – How do you value and position appropriately different pieces of equipments?
19:55 – They are going to carry my dead body out of here, do you see that as a legitimate exit strategy?
21:50 – What is your process of helping a business owner exit a business?
22:21 – Why do you need the situation?
23:43 – What’s the process of equipment appraisal like?
25:37 – How do zero retainers in auction work?
27:04 – How do I identify a good auctioneer and appraiser?
27:46 – Is there an association for the auctioneers?
28:51 – Do you have geographical restraints?
30:14 – Is the business owner maximizing their value out of their equipment by virtue of online presence?
31:53 – What’s your perception that going to an auction implies failure?
33:47 – What is the one piece of advice that you would give our listeners that would have the most immediate impact on their business?
Can you talk a little bit about what Gallivan Auctioneers and Appraisers are up to?
Matt and Gallivan are very busy right now. Everything from appraisal to real estate to liquidation to going out of business sale to one off pieces of miscellaneous equipment down in Central Florida. We’re running, I think, in five states right now, currently on different jobs, and they just keep stacking up.
Can you talk about your success plan now that you’re taking over from where your dad left the company?
Back in 2018, Norm and I talked about what he wanted to do and what I wanted to do with the future, my future personally, as well as the future of the business as he was getting older and he had moved down to Florida. We opened an office down in Florida, where he imagined himself without my retiring, which turned out to be the complete opposite. I think he’s working more now down in Florida, but it’s where he wanted to be. And that’s worked out great. So we discussed moving from his brain to mine and back in 2018, we finally put it all on paper and got it all figured out and I bought the company and we’ve been running strong ever since. Obviously my father has a lot more knowledge than I do. He started his business in 91 after working with another auction company for a couple of years out of Western New York. He went through the 90s, the early 2000s.
I came on full time and don’t know if 2001 or 2002 after I moved out here from Western New York, and we haven’t always seen eye to eye on how the company should be run and how business is done. Times have changed from back then where if you had a cell phone; it was amazing to now, especially in our world people would rather bid from their home or their office on their cell phone from 800 miles away instead of going to a live auction. And luckily for me, he’s always wanted to be on top of the technology, so getting him to transfer and do a lot of more online things and online advertising as opposed to print has actually gone a lot smoother. He’s looking to retire and I don’t blame him. He deserves it, he’s put his time and his blood sweat and tears into the business to build it to where it is and now it’s my time to keep running it.
Do you have brothers and sisters in the business too?
No, I have a sister who lives here in Indianapolis, but she’s never had a desire to be in the business. Ever since I can remember, she always wanted to be a schoolteacher. That’s what she did.
Explain the chant, what’s that origin? Why is it used and what’s its purpose?
I’ll start by kind of saying that, sadly the chant is dying in a lot of industries with all the technology and the changes, going to more online sales. We still do live sales, where you do have to have your auctioneer. A lot of that’s changing. A lot of like the world of tobacco farm, cattle farm, tobacco auction, cattle auction, auto auction. Those are some of the best chanters you will ever find because those are things that people still want to see. You want to look at this year in the eyes when you’re bidding on it. You want to stand in front of the car when you’re bidding on it. What I love about the chant is it excites people. You are not just standing there going 500, 500, 510, 510, 520. How boring would that be to look into for six hours?
So it gives you the ability to pump excitement into a sale, it get people going, it helps create competition and it also helps your auctioneer just be able to continue to move along and speed things up because otherwise these sales will go on for 12 hours.
Do you offer every type of auction available?
Yes, we do a wide variety of auctions from strictly live to live with a live online webcast. So you can come to the auction bid at the auction, or you can sit 10 states away in your office and bid on your computer in real time while we’re selling at the auction.
How does online auction work for you?
We use software that allows the people online to see pictures of what we’re bidding on, the description, the current price, the asking price, just like if you were there listening, and they’ll also get audio. If you want to listen to it, you can listen to the auctioneer chant. Sometimes when you’re not there, it’s a little easier just to watch the numbers change on your screen and make a decision whether you want to jump in or not. We’ve been using it. We were real early on. My father’s always really been at the forefront of the technology changes. So when this became an option, he jumped right on it and we’ve been doing it ever since. And obviously it’s grown and grown and grown throughout the years, everyone now has a Smartphone and they have a laptop and a desktop. The ability to do it is there, but there are still a lot of your guys and gals that want to touch it. They want to see it. They want to stand in front of it while they’re buying it. They want to look at the auctioneer. They want to look at the person that they’re bidding against.
It kind of gives everybody the ability to participate. So say we’re in Louisville, and we’re selling a machine shop, waves and turret punches and things like that. And there’s a guy in California whose company need one piece, it may be a $40,000 piece of equipment. That’s all he wants. Is he going to fly out to the sale, spend plane tickets, food, hotel, rental car to go, and when he gets that 40,000, he’s done, but there’s someone who’s going to buy it for 50,000, he just wasted two days and money to go home empty handed. Whereas now with the online only or the mix of live and online, they have the ability that if it hits $40,050, they turn the computer off or click over to Facebook or whatever they want to do. They don’t have to worry about catching a plane and spending more money. It really gives more people the ability to participate, which is great for our sellers. It’s great for buyers because they have more chances to bid and it’s great for us obviously at the end of the day. We have more participation and higher sales prices.
Do you use the English Auction more often because it’s what people are more familiar with?
It used to be, your quote unquote “English auction” is your live auction, the one that everyone knows if you’ve ever seen or heard of auctions, that’s what you think of. Now those auctions are always considered to be with reserved. A, we’re selling 100 pieces for a company. They’re liquidating, but they’ve been given offers on two pieces that are pretty good offers, but they would like to see if the auction will bring more. So what you do is you put a reserve on it. Now reserves are sometimes advertised, they don’t have to be advertised. But as long as your auction is not advertised as absolute or without reserve, you have the ability to not sell something due to the sale price. That’s all dealt with ahead of time in our contract; the auctioneer knows that if this piece doesn’t hit 50,000 it’s not going to sell. It also works in a case where say you owe the bank for all your equipment except for one forklift and you owe 20,000 on that forklift, but it’s worth 40,000. We’ll take it to auction knowing that they have to bring more than is owed on it to sell. So that’s your reserve, all auctions are reserved and less advertised absolute.
What’s the point of auctioneer’s involvement other than marketing and exposure in an auction?
Technically, in Indiana, if you call it an auction, you better have an auction company like. That’s one part where we come into play. The other part is auctioneers are more than just the chant. What I always tell people is we are marketers and advertisers that just happened to do auctions, because at the end of the day, my job is to bring people in to spend their money. And if I don’t do that, that auction fails, whether I’m the one bid calling or someone who’s never bid called before has done it. Our job is to facilitate start to finish, sign contract to check in your mailbox, that is the job of the auctioneer; you have to properly advertise, put together a package. If you don’t put the package together, you don’t put all the information out, you don’t get it in front of people; the person who you’re selling for should have just done it themselves.
How do you value and position appropriately different pieces of equipments?
Every scenario is different and that’s one of the reasons I love this business. One day, we’re appraising old Italian sports cars. The next day, we’re in manufacturing plants doing lathes, Mills, press breaks, whatever. The next day, we’re doing farm equipment up in Wisconsin, it’s ever changing, and it’s what keeps it exciting. Now, to your question of how do you do something different every day, then the answer is you gain knowledge for every job you’ve done. There are very few things that we haven’t touched.
Now there are certain industries that are very specific, aircraft is one of them. If you’re dealing with certain types of manufacturing that are very specific and there may only be four other companies in the world that do it, helicopters, large watercraft that are very specific to a purpose. There are people out there both appraisers and auctioneers, but that’s what they specialize in. And when you get to that point, you do reach out. The auction world is mostly friendly. So when you get into those scenarios, yeah, you reach out, you partner with people, you just talk with them, you bring in their appraisers to help you. But in general, metalworking, woodworking, construction, restaurants, bottling facilities, tech centers, they’re pretty straightforward both to value as well as to liquidate.
Anybody can pull up on Google type in, a Mitsubishi or a cat, 246 feet, and it’ll pull up 100 prices for you, but when we’re valuing items, when we go to auction, you’re looking at the condition of it, the hours on it, the mileage on vehicles, the wear and tear, has this truck towed, back tows its entire life and you do your research based on a lot more points than what most people think. That’s the valuing side. On the selling side, we build a marketing plan for every job, from the beginning of the job, they’re always different. We don’t reuse them, we buy new lists every time, if you’re doing mailings, if you’re doing email blasts, we take new lists, you do use different publications, depending on what type of equipment you’re selling. And that’s the main job of an auctioneer.
They are going to carry my dead body out of here; do you see that as a legitimate exit strategy?
I would not say it’s the best but there are some people who have owned their business for 40 years and they built it from nothing to what it is. God bless them if they want to run that strategy and hope that they can either turn it around, make it profitable and sell it or turn around and keep it around long enough for their kids to take it over and try and deal with the negative bank account and the loans and all that. It’s a viable option. I don’t think it’s a very good one though.
What is your process of helping a business owner exit a business?
First off, I want to know what your business is and what the situation is. Were you given the business when your parents died, were you the owner that you started it and you have no children to give it to and it’s in trouble or it’s doing great.
Why do you need the situation?
Because as much of I love doing auctions and I like selling everything piece by piece, it’s not always the best option for my sellers. I’ll be the first one to tell you that up front. If your company is making money and you are 70 years old and you just want to get out of it, you come to me and say, “I just want to auction everything.” I ask you, “Company’s still running? Is it doing well?” And they go, “Yeah, company’s doing great. I’m done. I have my money. I want to sell it, get the rest of my money and retire.” And I go, “Well, you can always auction it, you can always sell it piece by piece, or we can call my buddy Ed and talk with him about possibly a better option for you, ongoing businesses especially if you don’t have anyone to pass it on to or family that wants to buy it.” Some people don’t think about that, they think well, I’m done. So let’s just sell the company off piece by piece. But it’s not always the best option.
What’s the process of equipment appraisal like?
Typically, unless we’re doing it for a bank, if we’re talking strictly from the business owner standpoint, I’d ask them why they want an appraisal because I want to know what every piece is worth. Okay, but you want to go to auction with it. Yeah. My appraisal is going to look different than auction results. That’s because not every piece is the same, not all timings the same, you can sell it in one city and 50 miles away, sell it in a different city and it will bring a completely different amount of money. Do you sell it in spring, it might be different than so. So my appraisal to you, which you’re going to pay for, is just an additional expense. Whereas typically, we will go in and we’ll give you a range, you’re not paying for the appraisal; we’ll give you a range that we think reasonably, that these assets will bring in the current market at auction. That’s something that we do that internally, whether you ask for it or not because that tells me how much I’m going to spend to advertise it because I’m going to spend more on a million dollar job than I am a $200,000 job. You got to get to more people. If there’s 5000 assets, I’m going to spend more to advertise it than if there’s 500 assets. It’s all a numbers game.
How do zero retainers in auction work?
The way we work is unless we are selling one piece and it has a reserve. Say I’m selling a manufacturing plant, just the real estate and you need $500,000 out of it or you can’t sell it. I’m going to ask you to pay via advertising upfront because at the end of the day, if your profit is only worth 400,000 and you won’t take anything less than five, now I have to try and fight you to get advertising money. As long as I did my job, and we brought people and the highest offer was less than you expected, I still want to make sure that I at least get my advertising funds back out of that. But no, on a daily basis, if I’m coming in to liquidate your company, I know there’s going to be enough money there to cover all the expenses. We will forward all that money, so you don’t have to come out of pocket anything but your time to show me around and look at my contract.
How do I identify a good auctioneer and appraiser?
A lot of it comes from Google, you Google or you ask your banker, your bank in general who they use in what part of the country, but usually you get on you do auctioneers of this sort of equipment and our names out there for everything from woodworking to yellow wiring to restaurants. It’s just the history of all the auctions that we’ve done.
Is there an association for the auctioneers?
There’s the National Auctioneers Association, the NAA which we are members of. Every state has its own Association. So we’re members from Indiana and in Florida. If you’re in California, and let’s say you own like an FBO, or you have four airplanes that you ran out, you have a maintenance shop and you’re looking to sell it, you’re looking for an auctioneer. Well, I guarantee if you get on Google out in California and you type in aircraft auctioneers, our name will pop up because of all the advertising that sits out there on the web, even 10 years after we do a sale, and you’ll find it and you’ll go, “Oh, well, they did a job in Iowa. They’re based out of Indianapolis. Maybe I’ll call them and see if they work in California.”
Do you have geographical restraints?
The way I put it is we will do anything to the Mississippi unless it’s worth enough for you to bring me out. We’ve done jobs in California; we’ve done jobs on Texas, Iowa. We will work anywhere. And a lot of our bankers will run us everywhere. We work for Bank of Chicago that do work in Arizona, they’ll send us down there. Just because they know us, they trust us and they don’t have to go find somebody and not know what they’re going to get out of it.
Is the business owner maximizing their value out of their equipment by virtue of online presence?
Yes in almost every case. As I said, we’re doing a sale in Indianapolis. If I do it only live, that means whoever is going to come to it has to travel. Now, if you’re close enough and you can travel that morning and go home that night, it might not be a big deal for you. If you’re 500 miles away and you have to come stay overnight, go to the auction, stay overnight, and then go home, you’re probably going to be less inclined to participate. As I said earlier, if we’re doing it live and online, you have the option to drive 500 miles, come to the auction or you can sit at your desk and listen to the auction, watch what people are bidding on, what they’re bidding and bid right along with them. I would say in almost every scenario, having an online presence is beneficial.
What’s your perception that going to an auction implies failure?
It depends on the scenario. Sometimes it is last ditch option, maybe you’ve been trying to sell your company for three years and you haven’t gotten one bid on it. And you’re in poor health and you have to do something with it. Maybe the auction is the last ditch effort for you. But I would say in the grand scheme of things, an auction is a way as long as you are working with a professional company, and people who know what they are doing is actually a way to turn your equipment, your machinery into the top dollars through competition as opposed to just throwing your pieces of equipment out there on Craigslist. And the only people who are searching for that exact piece may come across your listing. At an auction we are blasting nationwide, we sell a lot to Mexico and Canada. So your audience at auction as opposed to just selling it off piece by piece by yourself is much larger, it will create a much more competition and at the end of the day, when you have 150 people bidding on your equipment, you can rest assure that that number that it stopped at was the most that these people were going to pay for it.
What is the one piece of advice that you would give our listeners that would have the most immediate impact on their business?
Take out the trash. I’ve walked into hundreds and hundreds of manufacturing plants, woodworking, metalworking, bronze, brass copper and they have stuff that has been sitting there work in progress from a client that they lost 15 years ago, and they still have 10,000, 20,000 square feet of stuff that will never get used. It is scrap metal, it is taking up space. These same companies usually have five of the same machine they run to at a time and instead of changing out the tools, they just go use the other two machines half the time. So now you’re wasting space. And we all know that that real estate is not cheap. You have idle equipment that if you don’t use it for six months, and don’t take care of it, it’s devaluing and you’re sitting on cash. You’re sitting on things that you’re not using or you may use once per year that they have value to you in cash more than sitting on your shop floor collecting dust and just depreciating.
Same thing with trash and garbage, we’ve all seen it, you walk through a plant, there’s 20,000 square foot of just scrap iron and it sits around, it collect dust, it gets dingy, you can always tell those plants that your employees are walking by this stuff day in day out, year after year going, “Why? Why do I work in the filth hole?”
Connect with Matt:
Website – http://www.njgallivan.com/
LinkedIn – Matt Gallivan