| Bush
league brokers
Bush league
brokers, when they get a listing, immediately when they get
a listing, immediately call down the street to a client's
competition. Not a good thing, generally. HOWEVER, if the
competition has expressed an interest in your property, and is
financially qualified, and you don't plan on staying in the are,
what's the problem? Bad blood between broadcasters doesn't mean
bad money. I've had clients that refused to sell to competition,
even area broadcasters who weren't competition, they just didn't
like the guys. The other guys sold to a consolidation group, and
now, no one will touch my client's properties because no one want
to operate a property surrounded by the big dogs. Because radio,
especially in small and medium markets, is such a personal-people
business, all too often, emotions get in the way of business. In
selling your property, leave the emotions home, think with your
head and your pocketbook.
Out of Balance In A
Small Market
Many
radio station buyers get hung up on the transaction when they
spend too much time analyzing the seller's balance sheet. The
financials are important in the respect that they are a guideline
on the station's expenses and income. Remember you're not buying
the owners profit and loss statement. Your expenses may be less or
more in many categories. Using the financials, try to determine
the "cash flow" for your new operation. That is simply
what comes in and what goes out. Work out your budget then find
the money in the old owners financial records. Many costs are
subjective and can vary with the owner's whims. Others are fixed
(electric, etc). Don't make the mistake of projecting a dramatic
rise in sales, unless you can justify it. If the old owner had no
sales people on the street and you plan to add two or more, then
it is reasonable to expect a sales increase. Be realistic and try
to put your optimism in check. You'll sleep better at night when
you make a firm budget and stick to it. Remember this...there is
no good time to buy a station! Prices usually go up and markets
are getting harder to find. So live your dream.
What do I
want to do in this business?
Do you want to run the show,
doing all the jobs, and sweeping the floors? Or do you look
forward to being in a larger market, out programming the other
guys in town, or building a group? I spent my career in small
towns doing "all the jobs" and sometimes when my feet
hit the floor at 3 AM after a call by the morning guy who couldn't
make it to work, I wondered if my friends in the big markets, who
wore suits to a nice office every morning had it better. I started
appreciating where and what I was when one of those guys came to
visit me at my stations in Upper Michigan one summer to go
sailing. As I wrapped up the day on Friday before our weekend
trip, he watched as I did a newscast, some production, and other
routine chores He wistfully said, "you have all the
fun". He really missed the basic stuff many of us are in
radio do every day and what originally attracted us to the
business. . His position running a large market station wouldn't
allow him to go "hands on" at the station. The single
owner-operator sometimes takes these "fun" jobs for
granted. What do you want? Live your dream!
It's No
Secret
The first question we usually
get from a seller is "can I keep the fact that my station is
for sale a secret?"
The answer is "probably
not". Despite that, many owners try to keep the station sale
a secret. It usually doesn't work very well. In a small town, word
gets out. If one extra person knows, then shortly the staff will
know, and your competition is on the street spreading the word.
What's the best answer? Don't hide anything. Call your staff
together and fill them in. "Everything is for sale" is a
good statement that most people understand. Don't sell your staff
short. Hopefully you hired smart people who can think for
themselves.
There's nothing wrong with
reaping the rewards of your labor. If you bought a small market
station, improved it, provided good service to your community,
then you deserve to get the money you earn by selling it. Blind
listings are difficult to keep secret because you have to be so
generic it's almost impossible for buyers to determine exactly
what you have. It you say combo Midwest, that might work but it
greatly reduces the number of people who may have an interest in
the stations.
Keeping the location and
market confidential then describing your stations in great detail
makes it easy for someone familiar (staff, competitors) to deduce
what station the listing describes. A simple phone call from a
broker to a prospective buyer, who happens to be friends with a
station owner down the road can spill the beans, and the word that
your station is on the market is public knowledge.
In summary opening up your
listing, telling the world your radio station is for sale, and
leveling with your employees, will sell it quicker with less
stress than keeping it a secret until somebody (and they will)
finds out. The first question we usually get from a seller is
"can I keep the fact that my station is for sale a
secret?" The answer is "probably not". Despite
that, many owners try to keep the station sale a secret. It
usually doesn't work very well. In a small town, word gets out. If
one extra person knows, then shortly the staff will know, and your
competition is on the street spreading the word.
Facing
Reality
At least
once a week, I get a call like this, "I want to buy a small
station in (name any large city)" Me: "There are no
small stations in that city." Caller: "None for sale?
Are you sure?" Me: "No, I mean there are NO such things
as small stations in major markets." Caller: "But I want
one in LA, what would an AM in LA cost?" When I quote the
latest sale, frequently way over hundreds of million
dollars, there is a gasp of disbelief on the other end. "For
a small station!" Ok, let's see why a 1000 watt AM in
Clinton, Iowa is less expensive than the same exact station in LA,
or Chicago, Miami or Memphis. Population. That's it. How many ears
can listen and how many advertisers are there to market to those
listeners. The same signal goes the same amount of distance but LA
has a denser population than Clinton, IA. One signal covers
several million listeners and the other less than 60 thousand.
More population, more advertisers, therefore more revenues and
that equals a higher station price tag. The next question almost
invariably is, "OK...I can't afford that kinds of money, what
will it cost to just build my own station on this piece of land I
own?" The answer: "you can't, and that's another
column!"
Planning to Sell? Plan
before you sell.
I advise all potential sellers,
whether I broker the property or not to do three IMPORTANT things.
1. Make a plan.
That means, decide what you wish to
gain from the sale. This is not just a financial plan, but a life
plan. Are you wishing to get out of the rat race? Do you wish to
buy another property somewhere else? Decide on a price, ask for
advice as to what is reasonable in the current marketplace. Trying
to find out what you "could" get is not a plan, it's a
game. If you think the signal can be upgraded or the tower moved,
find out BEFORE you put the station on the market. Decide how you
are going to market the property. Print? Broker? A confidential
listing? An open listing? Terms or cash? Talk to your CPA to find
out what is better for you, a stock sale or an asset sale.
2. Commit to the plan
THIS IS THE MOST IMPORTANT STEP...
Putting the station on the market at some price or the other is
NOT a commitment. Putting the property on the market and sticking
with the price IS a commitment. Don't raise the price after you
have already put the stations on the market. It is a waste of YOUR
time, the BUYERS' time and if you hired a broker, the broker's
time. This isn't a game you are playing, it is serious business.
If you are selling the properties yourself, commit to answering
inquiries in a timely manner. Be ready to return phone calls, and
not be coy with your P&L's or equipment list. If you have a
broker, then don't plan on calling three times a day or three
times a week. Once a week is reasonable. Don't insist on calling
all potential buyers yourself. Let the broker earn his paycheck,
unless, of course, you really have no intention of paying his fee
in the first place. A contract is a legal commitment. Be ready to
live up to and honor that commitment. Otherwise, don't bother. You
look foolish and word gets around very rapidly that you are not a
stand-up person. Prepare yourself mentally and emotionally to go
to step number three. Stiffen your spine and then....
3. .Implement the plan.
Do the studies to upgrade or move.
Find that right broker. Write some dynamite copy for an ad. Clean
up or simplify those P&L's, repair or replace that badly
running equipment. Put together your equipment list. Make that
studio and tower site shine. Be ready to sell. You CAN do this.you
are a radio guy!
Bodies
Bodies OK you think you have
a hot one, a buyer who has the right financials, or ...you need to
sell and sell quick. But, you have a "couple of small
problems." Aw the problems aren't that bad...just a few blips
that the new owner probably won't catch anyway.
Wrong ! Problems need to be
addressed right up front. Don't wait until the due diligence
period, and waste a buyer's time. Nothing will turn a buyer off
quicker than spending time and money to verify your numbers, and
jump through hoops only to find out there is a lawsuit, or you
don't really have a written lease on that tower site, or that
there is a lien on your equipment, that you meant to pay off when
the station is sold. You have a "little" problem with
the IRS. Address these problems as soon as you can. Sometimes it's
after a buyer has been impressed with "your baby", or
sometimes its before someone ever gets to the station.
Be upfront, honest, and go on
to the positives. Few problems are insurmountable if put on the
table immediately. Bush league brokers, when they get a listing,
immediately call down the street to a client's competition. Not a
good thing, generally. HOWEVER, if the competition has expressed
an interest in your property, and is financially qualified, and
you don't plan on staying in the are, what's the problem? Bad
blood between broadcasters doesn't mean bad money. I've had
clients that refused to sell to competition, even area
broadcasters who weren't competition, they just didn't like the
guys. The other guys sold to a consolidation group, and now, no
one will touch my client's properties because no one want to
operate a property surrounded by the big dogs. Because radio,
especially in small and medium markets, is such a personal-people
business, all too often, emotions get in the way of business. In
selling your property, leave the emotions home, think with your
head and your pocketbook.
Ownership...what
can you expect ?
The Internet has opened horizons
never known before in human history. The moniker,
"Information Super Highway," is most apt. There
are literally weeks where I get inquiries daily from would-be
radio station owners, people who have dreamed of radio ownership,
but had no place to start their search. Are the inquiries stupid?
Of course not. The only stupid question is the unasked
question. One question that a newcomer to radio ownership
NEVER asks is one to himself/herself. "What do I expect from
ownership?" Sounds simple, doesn't it. Yet when I ask a
would-be owner that question, there is a long silence.
"I want to give local bands/my favorite bands airplay."
Is one answer. "I have a format that has never been
done anywhere in the world or in this market" is another
answer. "I want to serve my community."
"I want an easy business for my retirement."
"I want to be on the air, and no one will hire me."
"Radio just sounds like so much FUN! I want to have
some FUN!" And my all time favorite answer: "It's
easy money, it's a license to print money. I can't believe how
rich radio station owners are!" Folks, the radio
business is like any other. The same business rules apply to radio
as apply to owning a hot dog stand, a shoe store or an oil
company, with a few exceptions. Sure, there are expenses
that other businesses do not have, like music licensing fees, and
FCC fees (you never own a license, it is granted and it can be
taken away for cause), and engineering fees. But, you must
understand the business. Here's the basic tenet of radio
station ownership. The music, and the news, sports and weather are
given away. Yup, free over the airwaves. Radio stations make money
selling advertising. You might have the finest format known to
mankind, but unless you can sell that format to advertisers, you
will be wasting your money buying a radio station. No, it
doesn't matter that you come from Upper Slobovia and there is a
large population of Upper Slobovians in your city. Gear the format
to them all you like, but unless you can convince ADVERTISERS to
buy commercials on your radio station, you will lose every penny
you have spent and then some. What should you expect?
Well, like any owner, you will work harder for yourself than for
someone else. Expect late night phone calls from a person
objecting to what some one said on the air possibly years
ago! Expect to hire young people who want a career, not just
a job. Expect that you will train them well, pay them well, then
wish them well when they move up to a larger market. Expect
to be questioned on the value of radio over newspaper (now that's
a no brainer!) Expect to be a very visible person in your
community, whether you like it or not. Expect to be a
respected member of your community. Expect financial ups and
downs. Expect to question your own sanity on occasion, especially
chasing a tornado, and calling in the info on your cell phone.
Expect to feel pride, knowing your competition didn't have a
clue or were cowering in the basement, while you kept the
community informed of the tornado's path. In other words.."
Ya don't plug in a radio station and expect money to fall out its
bottom!"
Care to comment?
e-mail me:
newscomment@buysellradio.com
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