EP 64: How To Sell a Play It Again Sports Franchise, with Scott Ward, Former Play It Again Sports Franchisee

scott ward  3:38  
Hey, thank you. So glad to be here and appreciate the invite.

Ed Mysogland  3:42  
Well, I'm happy to have you. i i before the show started. I began with a little overview of you. But could you could you go ahead and kind of cover your background and what you've been doing since you sold the company.

scott ward  3:57  
Sure. So I spent over 25 years as a multi store owner of Play It Again Sports stores, was one of their initial franchisees back in the 90s and really grew with them their kind of learning curve, and it was a great experiences great franchise enabled me to do what a lot of franchises do for people, no one in my family immediate family had ever owned a business or really completed college and so there was not a lot of that kitchen table. You know, business talk a stratagem and of things. So the franchise really helped me with that. And similar things when it came to exit you know, I I didn't know anything really the franchise as I was aging through the franchise. They you know, they were as well as people came up for resale. So that was actually very helpful. Since I sold the business in the last four years or so. I realized you know, being a community based guy and a community based store I started thinking about what to do next. And I love my community. And I realized that property values and property taxes, affect the money going into our basic communities. And then I thought, well, wow, commercial real estate is a big portion of that. And if I can help other businesses, with their leasing, or purchasing of investment, and be involved in that same way, that, you know, has provided a real meaningful, you know, second career for me in that sense. And that's been a lot of fun. Because let's say I'm one of the few commercial real estate guys now that's actually own the business. So I think about your cash flow,

Ed Mysogland  5:39  
you know, and, and I have to imagine that that is, that is a value add, because, you know, just being able to relate to that, like you said, the challenges of cash flow, and all of the all of the trials and tribulations that go into just just existing as a business owner, and I'm certain that that that your second career is, is just, you know, it's all about doing just that, that, that you can relate, and I'm certain that your clients appreciate that. So I got a bunch of questions, you get you ready? Hit me hit me. All right. So why why played against sports? How did you get into that?

scott ward  6:25  
So I, you mentioned my book, and that's my opening thing in my little book, the scab scars and pots of gold. I was sitting in when it first came out of school, I was working actually for ad agencies and film production companies. And I was a writer, and I was sitting in my office looking out to the parking lot with the owner pulling in and is really nice car coming in a little late. I'm thinking, Wow, that's pretty good. I should have my own business. Everybody should do it. It's easy. Yeah. And so film production company or an ad agency, but there was a little recession that came along. And that's the first thing budgets for people to add budgets. And I said, Wow, I had actually been a customer in this cool little sports store called Play It Again, sports. And we were moving relocating at the time, my wife got a job offer, coming back to Atlanta. And I thought maybe let me check that out. Because again, I really wanted to community based business. And I'm kind of a tree hugger, hikers, outdoorsman, and I thought recycling that. What can what can never go out of business, you know, in a recession, let's see. Sports, recycling, you know, how it was a no brainer. So that was investigating played against sports.

Ed Mysogland  7:47  
So that was a conscious decision. I mean, you really you thought about what, what was recession proof and how you were going to offset it. But that's, that's some good foresight. So fast forward now. 25 years? How did you know it was the right time to exit?

scott ward  8:06  
Well, I always had this antsy this to do a little bit of something else. And my kids were early high school and I started thinking before they get into college might be a good time to transition before we get that heavy college payment, and thinking about personal financial cash flow, and how you know, a lot of small to medium sized businesses, we we live almost personally off that business cash flow. Sure. So I'm like, Okay, let's sell this business. I'm kind of burned out anyway, blah, blah, blah, like we all get, let's sell it now. And I listed it with a broker and he created this nice booklet for me, and then I never heard from him again. I kept, I even called, and I was and so I was like, Well, you're not worth anything. Let me try someone else. So I tried someone else and they were a little bit better. But they were still not really speaking to me in terms of how can we get your business better to sell and valuations, they just pretty much evaluated the way it sat. Or trying to sell it the way it sat. Even selling your home, at least the real estate agent comes in and says hey, we need to stage you need to clean this up. They I found on the business broker side, I wasn't getting that and then it just I realized it and really being a part of a franchise helped to because I had insight into what others were selling for not selling for big, same inventory and margins and sales and comps and all these things. So I'm thinking okay, I'm just not ready to, you know, a year and a half went by, I was like, I just need to mentally re gear myself that six inch difficulty between the years mentally gear myself up, reboot this business, kick it in the butt. ramp up everything about it about the EBIT on everything else in Then we'll sell it right. So I. So that's what I did. And we ramped up and another I guess six years went by the kids were pretty much getting into college or getting out of college. And then I created a five year business plan to sell that business. Good for you.

Ed Mysogland  10:20  
I can tell you, most people don't do that.

scott ward  10:22  
Well, it just hit this hit me actually, after I sold it. I mean, it was just, you know, like, a lot of us our heads are in the weeds with our own business. But when I finally came up for air, I realized, we business people, we either have this great product and service, that we know how to sell it. And we come we take sales seminars to learn how to sell, learn how to market our business, to what for the business that we're selling it well, you know, the service or the product we're selling. But then when it comes to actually selling our business, we don't just think oh, you just obviously should know that it's worth something. But you have to make it. So in this in this five year plan, I had a three year balance sheet and p&l management program. I, for three years specifically worked on making and squeezing out every bit of profit and showing that profit. And yes, I was gonna pay maybe a little more taxes here a little more sure. And then I had a two year marketing plan. Good for you, too. And, and I was able to sell it, it added that to your marketing plan. I think I sold it in 1819 months or something, that's when we finally closed.

Ed Mysogland  11:36  
So were who coached you on the plan? Or did you just you just put it together yourself. And as you got

scott ward  11:45  
franchise helped a little bit right. You know, at that point, again, that as years had gone up, we were on our learning curve together. Also, I had been elected to be the on the franchise Advisory Council for the whole country. He's on between the franchisor. And all the franchisees are coming herding cats, sometimes now they're independent minded. But it was a great spot to be because I again, have a broad view of the overall system, margins, inventory, all the data that goes into the get sliced and dice when you go into selling a business. You know

Ed Mysogland  12:28  
that? No, there's some there's a lot of scrutiny. I guess. I wanted to ask, so you you. Well, first thing I did. So the franchise didn't have a resale component to their I mean, it's a large franchise operation.

scott ward  12:50  
So much better now?

Ed Mysogland  12:51  
Well, probably because of you

scott ward  12:55  
what you want it you know, you want that in a franchise, you want everybody getting better and learning at least you feel like your royalties are going somewhere. They're getting better. But um, so I knew I needed a booklet I knew I needed. You know,

Ed Mysogland  13:10  
that sound promotional material? Sure, yeah.

scott ward  13:13  
It lays out every single thing about your business. And anyone getting ready to sell their business is you need to just be a total open book about every aspect. And that creates trust immediately.

Ed Mysogland  13:32  
Yeah, and and it does, and but at the same time, I think that that there needs to be the appropriate phasing of information based on the as you develop that that trust. Yeah. Yeah.

scott ward  13:47  
So one of those was, yeah, because everybody comes in kicking the can well how much you want for sure. And so there was a, you had to submit your financial statements and stuff to be approved, but through the franchisor. But if you're selling an independent business, I would suggest you have the same exact criteria, you know, work with your business broker, such as yourself or your banker, accountant, attorneys to say, Okay, here's the minimum that someone is realistic about buying your business is going to have in personal assets. So you don't go any further. Yeah.

Ed Mysogland  14:29  
Did did you when you were working or evaluating brokers, how did you how did you select? I mean, you said the first one was a dud. Second one was a step above a dud. How did you know and and I'm, I'm, I've always been pretty transparent. I think, you know, it's okay. You know, it's better to have no broker than a bad one, you know, because it just, it just locks you in and your and your hands are tied. So, but but we're your stuff Oops, and, and I guess if you could rewind, what would have been the red flag for you on selecting someone to represent you.

scott ward  15:09  
So when I finally did sell it, I did sell it without a broker, because at that point, the franchise had ramped up their marketing of stores for sale and that type of thing. But, and I had, I really felt good about my package. The second bud is part of the data that the franchise was coming up with was 70% of the sales for a store. And this is just so unique to this industry that I would then 70% of the stores would sell to either employee or a customer, really. So they were like, you just put a big sign on the door that says, franchise for sale by owner retiring, transitioning, whatever. And you, you know, we I fully instructed my employees and educated them as to their value to the business. And, you know, how if anyone asked about it, to how to guide them, so then, so then we just put it was up on the national franchise, sure award, and then then it was up on our personal website. Board. So so that's how we, we started getting those. But But to your question, after, you know, being involved with the Georgia brokers Association, little bit, and, and then seeing the two, I'm also in a succession planning group. They, in evaluating a broker, I would say, you know, one is, you know, very clearly kind of like, almost like working with an accountant or an attorney, you set a scope of work, and a timeline, and expectations. And then you have something that you can compare maybe apples to apples, like, Okay, this broker is going to put together this book, but then what are you going to do with it? What are you? Do you have other outside advisors? Are you going to also, in our initial consultation, helped me create better value, perhaps, or suggest some outside coaching that can be brought in, and a realistic timeline from that broker? Knowing what it's going to take to sell? Because it's just not going to sell? It's not going to sell? Right? A couple of years, or two or three years or

Ed Mysogland  17:41  
longer, believe it, believe it or not, I mean, 53% of the time to from engagement to selling is it? And that's so that's half it's, it's six to 12 months. And

scott ward  17:57  
well, you know, because you're good.

Ed Mysogland  18:01  
I don't know about that. But

scott ward  18:03  
you know, where the people are, that are interested in buying?

Ed Mysogland  18:07  
Well, that's, that's true. But one of the things you said, which is total counterintuitive, is that 70% of the of your buyer, the buyer pool for the franchise is coming in internally or a customer. And, and so I guess my question is, how did you how did you communicate to your employees that, hey, I'm selling the business, you're integral to it? And I don't, I don't want you to be a flight risk. Because that's really, I mean, from from a, in a brokerage environment that is an absolute no, no, that and it's because that value is stuck in those employees. And boy, letting them know because, you know, everybody watches the movies, you know, I'm gonna get displaced, you know, somebody's gonna come in and break it up and sell the pieces and, and that, it doesn't happen that way. It never happens that way the value is in the employees. But boy, I have to imagine that was a real big risk for you to, to, to communicate, selling.

scott ward  19:20  
Maybe it was the communication that I had already been trust. I had already built up with my employees. You know, it wasn't like I was coming out of the blue with no communication. Oh, he's never talked to us before about how in overrides. When I first hire employees, I set them up. In fact, I mentored six former employees to go on and own their own businesses, good for you. Three of them. Three of them were played against sports stores, other played against sports stores in the region, and it was tough on me to lose them Sure. But I want you know, I told them when I first would first bringing them Boy, so if you're here, three, four or five years from now, you should be getting close to buying your own store good for you. I would set them up my expectation of them.

Ed Mysogland  20:12  
So, So, alright, so that that's the expectation. So, as an employee, typically they don't have a whole lot of funding. I mean, the people, you know, that we, that we have worked with, that want to sell to keep people, you know, they, they may be operationally sound, but financially, they may be short. So did you, did you bump into that? And if so, how did you get around it?

scott ward  20:37  
So I would tell them my story, you know, I, I didn't have a whole lot of funds getting going. But I had a little bit from, you know, a relative that passed away, not a whole lot, but just enough, but it was, you know, enough that I could put together a plan, and then present it to friends and family and say, did you come in with me as an investor or partner on, you know, buying this franchise? And so I just educated them as to my how I started. And, you know, in fact, when the employees would come in again, I kind of go this about what employee retention? And how do you get better employees? You treat it more like it's an entry level to a larger corporate professional. It's not just this retail. Little retail store. This is an entry level position to the sporting goods industry industry, which was gigantic, still is, yes, yeah. So whether you go to going into engineering, product design, safety, health, health care, medical, marketing, and media, I would I would, I would ask my employees, what areas are you interested in, in growing your career, and I would speak to them as you're coming on, this is the beginning of a career. So I just spoke to them in more of executive terminology, again, if they were part time employees, and I just think that would help over time. And that built the trust. So when it came time for me to sell, swinging all the way back around to your original question, how did you talk to your employees about this? We were already having conversations about you know, yeah, business plans and business models of whether our sales going to be in our margins dropped, oh, gosh, that's not good. Nobody's getting there. You know, we would really

Ed Mysogland  22:38  
so you are, you are really a transparent, transparent owner from from the beginning. And I mean, that's the way it sounds. Because I know a lot of employees, they don't, or a lot of business owners don't want their employees to know, the kind of money that the owner is making. Because then they're going to squeeze, they're going to squeeze on on bonuses, and so on and so forth.

scott ward  23:03  
To be clear, they didn't know how much I was making that transparent. But But I, you know, we just like any sales, you know, we set sales goals, we had margin goals, and then we got rewarded for it. But I, you know, I, we first sat down, I said, you know, I've been doing this 25 years. It's awesome. I love it. But you know, I'm going to be doing some transitioning, you wouldn't expect me not to, I expect you to, you know, I just put myself on that level. I said, You guys are an integral part of this. And I'm going to, you know, we're going to be putting the store up for sale and you guys need to be on your toes, because, you know, the future owner could be coming in and looking around.

Ed Mysogland  23:48  
Well, yeah, that well. Yeah. I mean, it's so

scott ward  23:54  
anybody. They were

Ed Mysogland  23:58  
so, so with the with the franchise, I mean, one of the things that I guess, I want to know, has to do with like, technological obsolescence. Like for example, you know, do people still go into retail and buy? You know, I know we did, you know, as our kids were growing up, we we always seem to be the last, you know, when when they the kids pick their sports, we always seem to be the last people to go to play it again, sports and everything had been picked over and I had to go to full retail. But

scott ward  24:37  
yeah, but maybe you can at least trade in a tennis racket for a bat or

Ed Mysogland  24:43  
so. So does. Does Facebook marketplace. I know Craigslist has kind of gone by the wayside. But I mean, it seems as though a lot of transactions are now being handled by the people themselves. And I'm just curious to know whether or not that So how did you guys offset that?

scott ward  25:01  
Yes, the Internet came on. It's like a lot of things in any technology. And I almost kind of look at it in a judo versus karate, traditional, like karate is kind of like force against force and Judo is like, you take force and you you go with it. So when the internet and all this started coming on, and all the price comparison, people would pop up and go, Walmart's got it for this, you know, and they found in your face or something you'd say, that's fantastic. You know, what I will, we will, we'll match it. But here's the thing that Oh, you look at the bottom line is, is oh, they're all triple extra Smalls. In chartreuse, you really want the navy blue on in your size, or whatever it is. There was a lot of that that happened on the unit. But we've just embraced that technology, and use it to our advantage to help us sell our advantage. And the advantages with this particular model of business was that it played again, we gave you a full guarantee and inspection period of like 10 days. So you can take it to the ballpark if it was used, you know, but sure, new courts is new, we're going to always, like anybody give refunds on new stuff, if it's defective, or whatever. But you you can't get that type of easy return. And you're also create even more of a discount by bringing something in, we would start going through all the things we took, and people would start thinking, Oh, we didn't think about the horseshoes we've never used in five years, we didn't think about those little, you know, things like, we need more kids bikes, and we need baby seats. And we you know, there are all these things you're sitting at in people's homes, you start going through this list, and they'd go, Okay, well, you know, hold that. And we'll be right back. So when we were getting price comparison, we were you know, that our that particular franchise is unique, and that we gave guarantees customer service, we would match the same price on any given day, on the internet, something could be up or down, you know, sometimes it was more expensive than what we had. And I'd say I Should I raise my price for you and then go Oh, no, no, so we'd have fun with it.

Ed Mysogland  27:28  
And that's what we did. Yeah, it's, um, you know, and the funny thing is, it is at least the one locally that we have, I mean, it's always busy. It is always busy. And, and which is, which is great to see. I'm I'm I'm, I'm really happy when, you know, when when local businesses are thriving. How did how did you value your company? How did you? What Where did you come? So you? I mean, you got some consultation from brokers. That's true. But then when you went out to do it yourself? I mean, what did you go to market with? How did you price it? Or were you getting guidance from the I know, you said that the franchisor provided some market data on other sales or resales? did? I mean, did did it hold true? Um,

scott ward  28:30  
I would look at those. And so I had a rough idea from other market data from other resales around the country based on inventory levels and what our sales were compared to their yearly sales. But then we had a relationship the franchise had a relationship with an accounting firm, third party accounting firm, not my accountant. That was new the business, the new the resale business and new our you know, because there's several different franchise groups, right, there's once upon a child and plato's closet and dialogue or and all these other So, so this accounting group knew the windmark branded properties because of that, I went to them and I think I paid $1,000 for them to do a complete three or four valuation, you know, three or four different styles of valuation on our business, which you're more familiar with those. That's okay. But there's the the cash flow model, the beta model the, the times, whatever. Sure. So are they did they did four of those, it it came out, and I got, I had them do that after the three years of p&l, balance sheet management that I had done, I was ready to go to market now and do my two year marketing, right sell the business. And so that's when I was Putting together the final sales booklet and I wanted their valuation, and they evaluated the business. Like, I can't remember it was 12%, or maybe a little bit more higher than what I thought it was worth. Because they knew the business. And here's what's interesting is, maybe even as a business broker, there might be certain brokers that are better at selling, you know, convenience stores, and some are better, or certain restaurants or manufacturing or tech companies. But knowing that, that really was worth my $1,000, because it was like, it was a bunch of money more than what I invested to get those valuations and the education I got from them, was one of those that I even knew about my business, but I didn't know about it to talk about it. And that is, bankers, look at your inventory as a if you're an inventory type company, your warehousing, distribution, whatever, you've got inventory as a part of your assets. They look at those at those inventory and say, How old is it? If it's old inventory, it's not worth as much. What are the terms? If you're understanding, you know, if you're a broker or banker who understands that, that's another thing, get a banker understands your type of business, all bankers will say they can, but they can't. They're not all the same. They specialize better in certain industries. But most bankers would look at used inventory and go, Oh, we're gonna give you like seven cents on the dollar. That's

Ed Mysogland  31:36  
where I was going with this. I was like, Oh, my gosh, I have to. Yeah, go ahead.

scott ward  31:41  
However, in a used situation, which there are tons of use, I just heard a statistic this week, like 70, or 80% of Americans have purchased or sold something used in the last five years through some sort of used website, whether it's these high end purses Sure. Or whether it's whatever it is. So so that used inventory on on my books. If I'm getting a 60 or 70% margin on used versus 35 to 45%. margin on new writer, which one's more valuable? Sure. Oh,

Ed Mysogland  32:27  
and you're in your Yeah, you're exactly right on the banker on the banker portion of it, that if they understood, you know, when it goes to underwriting,

scott ward  32:36  
oh, my gosh, the light bulbs come on, and then you go well, if it's not turning fast, it's old inventory. But if it's turning fast, it's it's it's just cash flow. Right. Right. There's a subtlety that then you have to educate your buyer.

Ed Mysogland  32:52  
Yeah. Yeah, that no, and I can totally see, I can totally see that not and I did not, I did not think about it that way. And like I told you before, I've been doing this 30 years, I never thought I never thought of how you just described that type of inventory that, you know, the the margin associated with the I knew it, I knew it was high, but I'd never I looked at it from from a profitability standpoint, not necessarily as a collateral value. So I know, I know, we're coming a little bit up on time, and I do want to talk about scab scars and pots of gold. That's not just a book for franchisees, right? No, that's, that's

scott ward  33:35  
my editor said I should niche it. And since I had a franchise, we'll say franchisees, but it's really an Aesop's fable for business. So these ups fables, you tell a story, and it has a moral to the story. So scabs, scars and pots of gold, I tell my true life stories, from beginning to end, how I went through everything all the way up to selling the business. And my stories, I compare two true life examples of enterprise level businesses that did the exact same thing mistakes I did. And they have roomfuls of MBAs and CFOs and stuff, but they did the same mistakes and then there's a so there's a business lesson moral to the story that resounds with no matter how what size your business is so it's a easy read it's kind of like say a Chicken Soup for the Soul are nice. My teas

Ed Mysogland  34:35  
so before we conclude what if I if I'm a played against sports franchisee you know, and I am just thinking about just beginning I know I'm gonna have to do something in the next few years. I mean, what what are my what are my next depths What do I, regardless of a broker or whatever, but what what is what do I need to start thinking about? How do I start mentally preparing? I know I can I can get the book. But before that, because I think the challenge that a lot of business owners face is mentally checking out with the suits, they say I'm selling. I mean, they check out take a good foot off the gas. And that is it. Right? And so I guess, what, what are your final thoughts on, you know, this is these are the things you need to be thinking about.

scott ward  35:36  
So with any, any plan, a good well thought out plan, it's going to have a timeline, and expectations and goals to reach at each of those steps throughout your timeline. So when you set out a reasonable timeline for selling your business, that gives you those expectations so that you don't get checked out. Because you've saved yourself, okay? Well, I'm where I said I'm supposed to be. So let's keep at it. Because here in another few weeks, I'm going to be at this next step. And that the next step, and I'm I can see the light at the end of the tunnel. And I'm not checking out when you don't have any expectations or any, you know, guideposts than yes, so easy to check out, because you're just spinning. Whatever, whatever you know. So get the proper people get up, I would say, you know, check in with your accountant, check in with your attorneys, check in with a business broker and interview a couple of different business brokers. And, you know, maybe even your personal wealth management people to help you get that side. And with those, your team. Now you've built a team to run your business. Now you need to build a team to sell your business. So you get the right people and you ask the right questions. And that will help you come up with that proper timeline. And it sounds like a lot. But this can be done in a week. It really doesn't take that long to pull that team together. Because Eveleigh all those people I mentioned include including people like yourself and want to help. And and then it's just going to be part of that might even be you know, you get a coach or a business evaluation person who can come in. And, man, there's so much cash to be squeezed out of everybody's p&l and balance sheet, you don't even realize, like in my situation with my with, I now handle leasing for people. Just because your lease is not up for three years doesn't mean you can't renegotiate it right now and squeeze some cash flow out of that, put it in towards marketing or whatever it is, then promote within the next three years your EBIT on your cash flow, and suddenly your business valuation has been, you know, 1.5 more than what it was. Yeah. It's fun.

Ed Mysogland  37:57  
Yeah. I'm, I've wanted to make sure since the from a timing standpoint, I meant to get get to it earlier. But how does franchises like this fair in recessionary times?

scott ward  38:16  
The US businesses that it does very well. Yeah, I mean, it does well, and normal, everybody wants to save money. The nice thing about any used business or clearance or close out is to make sure you have a good product mix to answer your target audience target customers need. So even if you don't have everything they want, they can at least pick it up new or, you know, in some other way. They don't have to go to another location. Okay, that's a key.

Ed Mysogland  38:47  
Yeah. So how do we connect with you?

scott ward  38:51  
So I've got I've got a website, Scott ward. It's got me word.com. And then there's, you know, my email address Scott didn't work for at Gmail.

The book you can find on Amazon. It's under, you know, entrepreneurship, franchising, even again, you don't have to have a franchise I think to get get some fun kicks and giggles out of some of the stories. I use, I use Bobby Talladega Nights Bobby, slingshot.

Ed Mysogland  39:35  
Okay, well, I will we will make sure that we have all the ways to get in touch with you in the show notes. And, you know, thanks. Thank you so much for the time. I mean, I know your experiences and the work that you currently do as well as, you know, the big takeaway, just you know how you shepherd in Have you shepherded employees to not only go on that work for you, but went on into entrepreneurship and I think that, you know, that is a at the station to you on, you know, just the kind of guy you are and the help that you've given. So, thanks so much for your time today. And I hope you enjoyed it as much as I did.

scott ward  40:21  
I did. I was a pleasure. And thank you so much.