Smooth Transitions

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If you could try before you buy someone’s business, it might transfer oh-so-smoothly. Current clients would stay and love you to pieces—your own clients would move right in seamlessly. Although this could happen, it frequently does not. Here is how some equine business owners facilitated their transitions.

Hobby Horse Clothing Co. entrepreneur Suzanne Vlietstra bought a boarding facility, Rancho de Felicidad in Chino Hills, Calif., where varied disciplines are welcomed. The barn came with existing clientèle so she hired a well-known business consultant, calling it “the best money I ever spent.”

His directive: “You only have one chance to come in and be the new sheriff in town. Don’t screw it up.” Vlietstra drew up boarding contracts and stable rules she calls “quite inclusive” and sent them to all clients before taking over day-to-day operations. Four years later, she still uses the same contracts and rules with minor updates and still enjoys many original boarders.

“Others moved on for various reasons and found a better fit for their needs, ambitions, or budget,” says Vlietstra. “By having rules and applying them as fairly as possible, I believe we have earned the trust and respect of our [current] boarders and made our own lives much easier.” After investing heavily in her property, the barn is full with a waiting list and operates at slightly better than break-even.

Operating up north in Ardrossan, Alberta, Canada, Karen Nelson, co-owner of English-discipline Hillside Stable, also encourages openness. Nelson worked for a trainer who bought a business with existing clientele. Many perceived the good-intentioned changes by the new owner as unwelcome.

“It got their backs up,” Nelson says. “It would have made more sense to involve the existing clients in meetings and to welcome feedback, so that they felt they were part of the changes. As it was, I think they felt they were going to be pushed out or taken for granted, so they left. It would be like someone moving into my house and changing everything without asking or discussing. I would feel like a stranger in my own home.”

Seller Beware

Selling your business sounds simple enough, right? Wrong. Even if both parties sign what appears to be a totally comprehensive contract, those situations you didn’t consider can haunt you later.

To protect our revered source, we’ll use the anonymous name, “Sue,” who had invested more than 25 years at a major equestrian facility before selling to start fresh elsewhere.

“People who buy your business often don’t stop to realize that your clientèle are there because of you. All barns have a personality,” she says. She cautions prospective buyers to check inflated egos at the door, and not to automatically think they’re “better” than the existing seller or that they have something so irresistibly different to offer. If they really do, word will soon get around and clients will come running.

A sales contract can’t guarantee any old clients will stay, and in hindsight, Sue says hers contained stipulations that could have been better spelled out. “The most experienced attorneys [in this genre] should handle the transaction,” Sue says, “because the smallest things can turn bad.” If an issue isn’t rigorously defined, you have minimal chance of regrouping in a friendly environment.

Case in point: her contract stated she’d be a consultant to the buyers for a specified period of time. She could only speak well of the new owners or say nothing about them. As her clients left of their own accord, the buyers blamed Sue. She, her buyers—and her business’ insurance company—sat through teeth-grinding hours of essentially futile, expensive arbitration. “No one should accept arbitration or mediation as a way to settle this type of dispute. You need your day in court,” Sue says.

An extremely careful and knowledgeable professional, Sue chastises herself for being naïve. “I thought we could meld the two groups together. What happened was out of left field.”

Is Everybody Happy?

Buying a business? Expect an attrition rate of at least 50 percent of the clientèle, says Rachel Kosmal McCart of Equine Legal Solutions, Inc. (www.equinelegalsolutions.com). That’s even if you make major improvements.

“You might be making positive changes, but existing clientèle were happy with the way things were,” explains McCart. “It’s why they are there. When you come in, you will be somebody different. Horse people—like all people—can be resistant to change.” As “Sue” knows all too well, terms and conditions of these types of deals are very individual, and McCart agrees.

You’ve probably thought that a non-compete clause in that contract would be useful. It is, but requires sound professional advice. “Non-compete” is a term used in contract law under which one party (usually an employee) agrees not to pursue a similar profession or trade in competition against another party (usually the employer). You can apply this to the training business, because a trainer could sell a business, promise he or she is moving to Siberia, and—surprise!—that trainer is right down the street, setting up at a new place.

“Seek local counsel where you are, as enforcement of non-compete clauses varies widely from state to state,” McCart advises. “Most of the time you must draft them very carefully to be enforceable, and often the clauses must be limited by duration and geographic scope, among other parameters.”

Put Out the Welcome Mat

As our contributors would agree, a barn meeting or social event with snacks and beverages is a great way to announce changes in as positive a way as you can, says McCart. Then, she advises that you talk about how changes will benefit boarders and why they’re occurring.

Here’s the caveat: Hold the meeting early, before barn gossip rears its pervasive, insidious head, leading to inaccuracies. Keep the rumor mill to a low roar if possible.

What if you want to do an extreme barn makeover? Your intentions may be great, but if board was really inexpensive and you make your place into a showplace, “you’ll have to be prepared to lose all of your boarders who think you’ve changed the facility into one they don’t want,” McCart warns.

But there is an upside: if you undertake major construction, it’s best not to have anyone around. Then, as you rebuild, advertise the place as “under new management,” and with positive improvements made, you’ll restructure the way you want.

Should you change the name? “If the place has a really horrible reputation…yes! If not, and everyone knows where it is, probably not,” says McCart.

A Business Decision

Whether buying or selling, you must always be a savvy businessperson. Assume nothing. Buying someone else’s training business is no different than buying any customer-oriented service business, warns Laura Hays of Nantua Farm in Richmond, Ky. (www.nantuafarm.com), who focuses on retraining off-the-track Thoroughbreds. While she didn’t purchase an equine business, she did buy a local gym studio. And the lessons learned are similar.

The gym studio she took on had terrible client retention and sales. Hays overhauled the whole thing, offering monthly payment plans, discounts for a year’s registration, added classes and better-qualified instructors, plus competitive and recreational teams. She cleaned the place up, bought new carpeting and says, “Sometimes you must spend money to get new clients.”

She also says:?Don’t come in high-handed, changing the rules. “Spend time asking clients what they like and don’t like. Granted, some requests are ridiculous and I say, ‘Sorry I can’t make you happy. Let me give you your money back.’ ” Hays now does back flips over the gym’s success, as it has a waiting list.

Buying or selling an existing equine business has its advantages and disadvantages. But if you approach the process with eyes wide open, there will be fewer surprises.