It’s easy to sterilize the phrase “succession plan,” but the truth is it’s a process that’s anything but passive. Even the most by-the-book, well-planned succession plan is tied to at least two hearts and fueled by ambition or exhaustion or desire. It’s not just an exchange of money and goods, it’s a true sentimental torch passing.
Take, for example, Runners Roost. Owner John Shults trained Kent Wories from his earliest days of specialty retail, grooming him into the ideal ownership candidate. But that meant they also developed a working relationship and a mutual passion for the shops they ran. Pulling in outside perspectives allowed them both to get a fair deal in the exchange while also maintaining their relationship.
1. Could you tell us a bit about your involvement with Runners Roost prior to purchasing several locations? A brief history of your involvement in the specialty retail industry as a whole would probably be helpful.
My first experience with running specialty was as a customer in high school, going to get fit for shoes at Mike Toolen’s Running Start in Illinois. Mike, the owner, gave me great service that day and was heavily involved in the local running scene. From then on, I always sought out the local running shop wherever life took me. Shortly after college, my wife and I decided to move to Colorado and I decided to join the running industry. Some research into the running community in Colorado, and Denver specifically, led me to Runners Roost. In June 2010, I started working on the sales floor at the Aurora location. Around that time, the prior owners, John and Lynne Shults, were expanding the business and looking to offload some of the purchasing workload. Thankfully, he entrusted me to pick up some of the responsibilities. Over time, John challenged me by putting more on my plate and giving me an inside look into his responsibilities as an owner/operator. Eventually, in June 2016, we transitioned ownership and management of the company.
2. What led you to invest in Runners Roost?
Over six years of working at Runners Roost, I had developed a passion for the local running community and the organization’s mission and values. My view has always been that the local running shop is the hub of the running community. John and I shared this perspective on the future opportunities for the business. For various reasons, he was not interested in pursuing those opportunities, so he and I started to discuss the possible sale of the business. I was privileged enough to have investors who were ready to back that vision and my leadership in executing it. The only thing that was left was to sort out the details of how to make the transition. John helped to ease the transition by offering to consult with me after the ownership change.
3. What did purchasing a business look like, both technically (was it a long, legal-laden process? fairly easy?) and in reality (what changes happened in the stores? did day to day operations change?)?
It was a relatively long process, taking just about a year from the first exploratory conversations to closing the deal. The process certainly wasn’t easy, but it was very helpful that both sides viewed the change as the right move for the business, and therefore we were motivated to get the deal done. Nonetheless, there were seemingly unending legal details to sort through. I am thankful that I had a strong legal team to rely on for navigating all those issues. A good portion of our time, though, was spent on coming to agreement on the valuation of the business. This inherently tricky task of valuation was made even more so since both the seller and the buyer were passionate about the business. I was fortunate to have advisors that could add a more objective perspective into the valuation and the process of the transaction overall.
The operations of the business stayed more the same than different. John and I shared very similar views on the mission, core values, and basic operations of the business, so I carried those forward. Two significant changes were that we started to pursue growth opportunities in earnest and we addressed a few staffing changes. At the time of transition, John and I started working on plans for our new Stapleton location, which is now open. We also started making investments, such as inventory and employee development, that had been postponed because of the deal discussion. The staffing changes most precipitated from the fact that both the previous owners and myself had all held management positions. Consequently, we had three significant positions turning over right off the bat. That combined with a few internal promotions and one person leaving due to the ownership change, and we had a number of people on a learning curve for their roles. I think there are real positives to having the fresh perspectives, but it does come with its own set of challenges, too.
4. What surprised you most about purchasing a business?
Probably what surprised me most about purchasing the business was how emotional it became. John and I had a strong working relationship, but the process put a new kind of stress on it. We were both contemplating, often together, major life changes, which also carried major financial implications for us individually. This made the valuation process previously mentioned very challenging. One other element that added to the emotional nature was the potential of the deal falling through, and the consequences that might bring. Again, my advisors were helpful to provide an objective perspective and a check on what they described as “deal momentum.”
5. Are you involved in the RR locations that are owned by other franchisees? If so, what does that look like?
There are nine locations in the Runners Roost family of stores. Three of those locations are run as independent businesses that license the Runners Roost name. Those owners control all the operational and administrative aspects of their businesses. Our involvement with the license businesses mostly surrounds coordinated marketing efforts, such as our community racing team. We’ll also share insights on the marketplace, best practices, and product performance.
6. What advice would you give to other business owners considering how to create their own succession plan? And what about to folks like yourself who are considering investing in a business?
My advice for owners considering a succession plan would be twofold – don’t put it off, but remain flexible. In my situation, the right time to make the ownership change ended up coming sooner than either the prior owner or I had expected. Thankfully, both of us recognized the opportunity before us and decided to act despite our prior expectations. Additionally, John had been working on succession planning and plotting a course for an eventual ownership change long before any conversations started. That course he had been plotting, however, was nothing like the path we took. Despite ultimately taking a different direction than planned, the succession planning process had provided John with awareness of the key elements he wanted in an ownership transition. This knowledge helped to guide his decision-making when the time came.
For those considering investing in a business, my top advice would be to surround yourself with great advisors outside of the business. From legal to financial, and personal to professional, a few key people who can provide sound advice and honest evaluation are vital to the investing process. These people can help you to see through the emotion and break down the complexity when it all feels like too much. In the end though, you hold the risk, the reward, and the joy of the final decision. And that’s the best part of being a small business owner.