Our industry is changing rapidly and the next generation of poleprenuers are popping up everywhere. Some Existing Business leaders are also evolving and moving out of the industry as they progress to the next or simply different stage of their lives and careers.

I’ve seen several studios and other pole businesses change hands in just the past year or so, which is a great sign for our industry, as mergers and acquisitions are a normal part of the business cycle. If you are considering becoming a pole-prenuer, Buying an existing pole-based business rather than starting a new one may be a smart move. Consider what need you see in the market and analyze if you should buy an existing business, create something new, develop a partnership, join a franchise or establish some other business arrangement to answer that need. This type of analysis is similar to the one used when deciding whether or not to create a new event, which I wrote about here.

When starting, buying or joining (in a management or investment capacity) a business there are several existing financial and legal structures you should be familiar with. Each has a different implication on your personal taxes. These include but are not limited to: understanding the difference between an S Corp, a C Corp, an LLC, a partnership, non-profit structures and franchises as well as any international or local laws such as ITAR and FBAR considerations for those U.S. businesses with overseas bank accounts or dealing in controlled products/services. Consult with your financial advisor, lawyer and accountant as needed before making any financial decisions to understand what is best for you.

This is a general overview which weighs both the pros and cons of buying versus building your new pole business. It comes from my experience buying an existing pole business, being involved in a pole studio pseudo-franchise and helping friends who built their pole businesses from the ground up.

Pros buying:

• Existing social media reach
• Existing brand awareness
• Existing contracts/relationships
• Potentially shorter timeline to profitability
• Potentially existing trademarks or copyrights
• Many or some Processes/systems/database or other tools already in place
• Existing customers and leads/sales pipeline.

Cons buying:

• All the baggage you don’t know: who pissed off who, old history, bad former deals
• Potential for negative or not what you want brand associations (based on that “baggage”)
• Education time for whose “in charge” to industry — may be a pro or a con
• High cost to enter market
• Systems difficult to change/processes bad
• Databases out of date or non existent
• Maybe there are no customers or pipeline (for various reasons).

Pros building:

• Potentially lower cost
• Build the way you want
• Build your own reputation how you want.

Cons building :

• You have to build everything from scratch
• Little or no name recognition (unless you have an established personal brand which can overcome this)
• Potentially longer time for profitability.

Tips to buying a pole business:

• Make sure you look at all the paperwork which includes all financial files such as the Profit and Loss sheet as well as the business taxes
• Review all employment contracts and establish new guidelines for employees you wish to keep (not just handshake deals).
• Review all bank statements for the business and scrutinize carefully
• Try to take the emotions out of it — even though you may really, really want this, it may not be a good deal
• Don’t infer anything — clarify
• Get everything in writing.

Ask what comes with the business and under stand the costs associated to update or transfer to your name:

• What has to be renegotiated or transferred into your name
• What has to be redone — if you buy an LLC from out of your state for instance, you don’t really buy it. You have to re-establish the entity
• Trademarks – will need to be reissued in your name at a cost
• Bank accounts may be transferred or may have to reestablished
• What existing contracts exist and how do they impact your future budgets
• Employees — will they need new contracts? A raise? Will they tell you what’s really going on with the business? Will you lose customers if they don’t stay?
• Inventory of all physical assets and depreciation schedule
• Space/lease agreements
• Equipment status and age and warranty or service plans.

I sat on the board of an industry association and when the long time executive director retired, the board discovered he’d signed 5 future years of hotel contracts for the big, annual event. While he thought he was helping, this hindered the association as it outgrew and changed in the years after he left. Unable to break or even amend the contracts, the association suffered and lost money.

What should it cost?

When buying a business there are several ways to value it. This is often a multiplier of revenue, as past revenue can be a predictor of future revenue. It may also include “Goodwill:” an “intangible asset that arises when one company purchases another for a premium value. The value of a company’s brand name, solid customer base, good customer relations, good employee relations, and any patents or proprietary technology represent goodwill.” It could also include equipment or other real assets like property.
Businesses with recurring revenue like monthly membership fees are generally valued higher than a company that provides a service or product with no guaranteed future sales.

If you’re seriously looking to purchase a business get help. Help in the form of accountants and lawyers generally isn’t free but it could help you uncover expensive issues in the negotiation phase rather than after the fact. Always ask questions, negotiate and be creative with terms. A seller may accept a payment plan or some other compensation rather than a flat payment in the right situation. You may also want the former owner to stay on during a transition period or continue to provide intellectual property to support the business for a period of time.

Ultimately whether you are considering buying or even selling a pole based business always remember that despite our community being draped in glitter and rainbows, there are real financial and legal consequences in business. You won’t get a second chance to change your mind or the payment terms (you could try taking them to court if you change your mind but that can be expensive and time consuming) so do all your homework first and try to keep your emotions out of any negotiations!