According to a poll released by the Financial Planners Association and CNBC, 70 percent of business owners do not adequately prepare for retirement and a business transition.
Alderman Holdings buys well-established, profitable companies in the Chattanooga region when an owner seeks a transition. Alderman provides the financial capital to either fully or partially buy out the owner, and then partners with key remaining management to grow the company for the long term.
Jay Hildebrand, Patrick Wells, Ben Brown and Andrew Kean, partners of Alderman Holdings, draw on a diverse set of business backgrounds, including operations, marketing, law and finance. They've collectively held senior roles from COO, CFO and CEO to board member and owner.
With an understanding of the transaction side, and an appreciation for the operations side, Alderman approaches opportunities from a strategic, rather than a transactional, mindset. Rather than layoffs and financial engineering, Alderman believes innovation, strategy, investment in people and focus create the best paths for growth and value creation over a long period of time.
Alderman doesn't face the constraints of a typical private equity fund that must sell out of its companies in the short term. With a model built on buying and growing companies for the long term, Alderman strives to make the best decisions for the company – rather than the decision that will maximize the near-term sales price.
Trend: Why is it important to think about a succession plan for your business?
Alderman: If you are a small business owner near retirement, two key reasons stand out as to why you should plan in advance for the succession and/or sale of your company.
First, for the majority of small businesses, the owner’s wealth is “in the business.” Financially, the most important decision an owner might ever make involves the sale of the business. Yet, ensuring that it’s priced fairly so a buyer will actually want to buy it is important. And, by increasing the odds of a successful sale, an owner increases the likelihood that he or she will earn enough from the sale to help fund retirement, charitable goals and family dreams.
Second, many small businesses that will sell have teams of employees, suppliers and customers in and around the community. Poor transitions for the business imperil the likelihood that the business can have a healthy and sustainable life beyond the retiring owner, which ultimately impacts families and our community at large. Small businesses are the backbone of our community, and our community needs these businesses to continue into the future.
Trend: What are typically the options for small businesses in terms of succession planning?
Alderman: There are multiple options for a transition. Sometimes a member of the next family generation has interest, sometimes there is a key manager or management team that desires to grow into succeeding ownership, and sometimes there is a buyer like Alderman Holdings who can acquire and continue the company.
Regardless of the chosen route, we encourage owners to assemble a team of advisers in advance. Gather a CPA, business attorney, and family member or close friend around you. Each will need to offer the owner expertise and emotional support. The owners we have worked with often say this is one of the hardest decisions of their lives. Selling or transitioning a business can be very complex, plus for small business owners, so much of that person’s identity remains tied to the business, and owners often wrestle with tough questions like “who will I be and what might I do, beyond owning this business?”
Trend: What are the important things to think about when deciding which of those options is best for your business?
Alderman: Asking “what would a successful transition look like?” is the best place to start to begin breaking down important priorities in the face of such an overwhelming decision. Each owner’s answers will be different. But common themes we hear from sellers are financial and legacy oriented: Will I have enough money to live on in retirement? Will my people (employees) be cared for well?
The owner’s advisory council we mentioned earlier will be key in helping each person identify unique priorities.
Trend: What types of businesses would Alderman Holdings like to add to the portfolio?
Alderman: We seek to buy well-established companies in and around Chattanooga that generate at least $3,000,000 in revenue. We like “old economy” companies that provide products and/or services with a strong likelihood of demand in the future. And, we like to see these companies have a key employee or a team of key employees continue on in the business. Institutional knowledge and the ability to serve customers well require continuity of leaders with a passion for what they do.
Trend: Who are your current companies?
Alderman: We are proud to have two companies in our portfolio:
For more than 30 years, Majestic Stone has been quarrying natural Tennessee fieldstone and flagstone on Dayton Mountain. Known for its unique color and durability, Tennessee stone is preferred among architects, contractors, and homeowners. In addition to offering direct access to the source through its quarry operations, Majestic has design and fabrication capabilities that allow them to hand-select and custom-cut the stone needed for any job.
Based in Chattanooga, Southeastern Tool & Design provides our region's largest manufacturers with custom design and build solutions from reverse-engineered parts to tooling solutions to fully automated robotic cells. Providing custom, high-precision solutions on rapid turnaround times sets them apart from traditional machine shops.
Read more about Alderman Holdings at alderman-holdings.com.