Mednax equals Home Depot

[BLADEMDA]

My name is Tom Jones. I'm the owner of a local, privately owned small hardware store, Tom's Hardware. I've been at the same location for 26 years. I own the store but the lot is a long term lease. I'm 52 years old with 3 children all of whom are college age. My customers know me by name and I know many of them. I've built a loyal customer base by providing personal service and a friendly atmosphere.

Recently, Home Depot opened up a new store about 4 miles from my location. The prices at Home Depot are lower than mine because they buy in bulk and can demand huge discounts. I'm just a local shop owner so most of my items are 25 percent more than Home Depot. I've lost some business to the big box store but 80 percent of my customers remain loyal.

My current income from the hardware store was about $98,000 per year but the recent opening of Home Depot has caused a drop in income to $84,000. I have one full time employee over the age of 65 and 2 part time employees in high school/college. I run a lean operation. I'm concerned that my customer base will gradually wander off to Home Depot as their prices are lower and people no longer care about my personal service. I may be able to cut prices by 10 percent but even then I'll lose customers.

Two weeks ago Home Depot offered me $100K to sell my store and close up. They offered me a job as assistant manager earning $65,000 for 5 years if I agreed to close the store. Their offer is only good for 90 days. Fortunately, ACE hardware contacted me yesterday and made me another offer: $1 million for selling the store to ACE and I become store manager of that ACE hardware store earning $80,000 per year for 5 years. After that ACE will pay me fair market wage.

I don't see what other options I have at this point. It I don't sell to ACE or Home Depot I run the risk of going out of business. In addition, my realtor said the store is only worth $750K.
ACE is offering me more than I can get if I am forced to sell in a year or two. I know some of my customers will be angry that I sold out to ACE. Tom's hardware won't be around for my son to . But, the days of the local hardware store owner is over. I'm sure a few elderly customers will scream at me for "selling out" but I've got no choice with 3 kids in college and an uncertain future in the hardware business.

I've decided to accept ACE's offer for my store. ACE has agreed to pay all the legal bills and structure the transaction so I pay less taxes than regular income on the million dollars.
While I'm sad to see Tom's hardware become ACE my family and I need the financial security ACE is offering us.


My friend in Iowa owns a hardware store. He is doing well and offered me the chance to start over with him. We would open a second store at another location where the nearest big box retailer is 20 miles away. My friend is doing well and doesn't see a threat to his business at this time. I think he is wrong as even an ACE hardware opening in his town will hurt his business.

My advice to all those planning to enter the hardware business is to simply look for something else. Unless you want to work for one of the large chains there isn't much opportunity for success as an independent these days. But, the big box stores offer decent wages for upper level management and some locations will promote you quickly.

Sincerely,
Tom Jones

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[deleted126335]

Good analogy. One additional point. Many of the the young graduates of hardware school think that Tom is a bad person for selling. They now have no hope of ever owning their own hardware store.

 

[Silent Cool]

My name is Tom Jones. I'm the owner of a local, privately owned small hardware store, Tom's Hardware. I've been at the same location for 26 years. I own the store but the lot is a long term lease. I'm 52 years old with 3 children all of whom are college age. My customers know me by name and I know many of them. I've built a loyal customer base by providing personal service and a friendly atmosphere.

Recently, Home Depot opened up a new store about 4 miles from my location. The prices at Home Depot are lower than mine because they buy in bulk and can demand huge discounts. I'm just a local shop owner so most of my items are 25 percent more than Home Depot. I've lost some business to the big box store but 80 percent of my customers remain loyal.

My current income from the hardware store was about $98,000 per year but the recent opening of Home Depot has caused a drop in income to $84,000. I have one full time employee over the age of 65 and 2 part time employees in high school/college. I run a lean operation. I'm concerned that my customer base will gradually wander off to Home Depot as their prices are lower and people no longer care about my personal service. I may be able to cut prices by 10 percent but even then I'll lose customers.

Two weeks ago Home Depot offered me $100K to sell my store and close up. They offered me a job as assistant manager earning $65,000 for 5 years if I agreed to close the store. Their offer is only good for 90 days. Fortunately, ACE hardware contacted me yesterday and made me another offer: $1 million for selling the store to ACE and I become store manager of that ACE hardware store earning $80,000 per year for 5 years. After that ACE will pay me fair market wage.

I don't see what other options I have at this point. It I don't sell to ACE or Home Depot I run the risk of going out of business. In addition, my realtor said the store is only worth $750K.
ACE is offering me more than I can get if I am forced to sell in a year or two. I know some of my customers will be angry that I sold out to ACE. Tom's hardware won't be around for my son to . But, the days of the local hardware store owner is over. I'm sure a few elderly customers will scream at me for "selling out" but I've got no choice with 3 kids in college and an uncertain future in the hardware business.

I've decided to accept ACE's offer for my store. ACE has agreed to pay all the legal bills and structure the transaction so I pay less taxes than regular income on the million dollars.
While I'm sad to see Tom's hardware become ACE my family and I need the financial security ACE is offering us.


My friend in Iowa owns a hardware store. He is doing well and offered me the chance to start over with him. We would open a second store at another location where the nearest big box retailer is 20 miles away. My friend is doing well and doesn't see a threat to his business at this time. I think he is wrong as even an ACE hardware opening in his town will hurt his business.

My advice to all those planning to enter the hardware business is to simply look for something else. Unless you want to work for one of the large chains there isn't much opportunity for success as an independent these days. But, the big box stores offer decent wages for upper level management and some locations will promote you quickly.

Sincerely,
Tom Jones

Here is my recommendation to Tom Jones:

1) Sell to ACE
2) Figure out what the big box stores don't offer that a small independent CAN offer. Often, as you mentioned, that is service.
3) Unless there is some kind of non-compete with ACE, then use this as an opportunity to consolidate the business--figure out where the "useless" overhead is with your small business and get rid of it. Likewise, find as many deficiencies as you can with the big box store and figure out how to offer those items and services in a more cost effective way while working for ACE. Tom Jones's prior business experience should allow him to accomplish this with relative ease.
4) Take advantage of the internet.
5) When setting up a hardware store, look for ways to OWN THE BUILDING. Don't lease, own. The other slots in the building you can rent to cover your overhead.


Good analogy, though. I can think of the old True Value hardware store (independently owned) in my university town....I wonder if it is still around.

@BLADEMDA
Do you see this trend happening with corporate dentistry? They are backed by private equity.

 

[BLADEMDA]

Here is my recommendation to Tom Jones:

1) Sell to ACE
2) Figure out what the big box stores don't offer that a small independent CAN offer. Often, as you mentioned, that is service.
3) Unless there is some kind of non-compete with ACE, then use this as an opportunity to consolidate the business--figure out where the "useless" overhead is with your small business and get rid of it. Likewise, find as many deficiencies as you can with the big box store and figure out how to offer those items and services in a more cost effective way while working for ACE. Tom Jones's prior business experience should allow him to accomplish this with relative ease.
4) Take advantage of the internet.
5) When setting up a hardware store, look for ways to OWN THE BUILDING. Don't lease, own. The other slots in the building you can rent to cover your overhead.


Good analogy, though. I can think of the old True Value hardware store (independently owned) in my university town....I wonder if it is still around.

@BLADEMDA
Do you see this trend happening with corporate dentistry? They are backed by private equity.

Specialty hardware stores which sell unique stuff like marine grade stainless screws. Still, most hardware stores won't survive against the big boys.

 

[BLADEMDA]

http://en.m.wikipedia.org/wiki/True_Value


More Anesthesiology groups are merging into AMCs with the help of private equity. But, this means your AMC better be running an efficient operation at your hospital or another AMC will outbid you

Whether you sell out or merge the bottom line is that the newly hired graduate will be an employee of the company and not an equity holder

 

[Silent Cool]

http://en.m.wikipedia.org/wiki/True_Value


More Anesthesiology groups are merging into AMCs with the help of private equity. But, this means your AMC better be running an efficient operation at your hospital or another AMC will outbid you

Whether you sell out or merge the bottom line is that the newly hired graduate will be an employee of the company and not an equity holder

@BLADEMDA
What do you think of mobile anesthesia?

 

[Planktonmd]

@BLADEMDA
What do you think of mobile anesthesia?

I think the concept is great since it is trying to reclaim the market of office based anesthesia from mid-level providers.
The profitability remains to be seen.

 

[Silent Cool]

I think the concept is great since it is trying to reclaim the market of office based anesthesia from mid-level providers.
The profitability remains to be seen.

http://www.drtarg.com/

Here's one guy who does it (ostensibly) with success. I contacted him. Nice guy; smart, too. He's modified a few of the typical anesthesia machines/devices and describes on his website how he did it. Pretty cool stuff.

 

[ether123]

kind of makes u wonder y stay in private practice. Academia may be the way to go. Either way u will be an employee, but in an academic institution atleast there's room for growth (fellowship, publications, etc) with some upward mobility. Also, if u achieve a certain status (i.e. Associate professor), other academic institutions will honor that and start u at that level. At AMC, u can work for 20 yrs and still have the same status as a new hire. Finally, in academia, u have the help of residents and fellows, so u r not slaving in an OR by urself in the middle of the night yelling at the blood bank for blood with no help in sight!