Issue link: http://www.e-digitaleditions.com/i/201447
idea exchange Matchmaker, Matchmaker Response So Far The Idea Match business owners on the cusp of retirement with alumni who wish to acquire their enterprises Location The University of Kansas School of Business in Lawrence How It Started Several years ago, an economic development officer for the state of Kansas mentioned to Wallace Meyer Jr. that too many of the state's small- and medium-sized businesses were closing for lack of successors. Meyer, director of the Center for Entrepreneurship at the University of Kansas, realized there was a void in the market. That conversation inspired RedTire, shorthand for "redefining retirement." Part of the KU School of Business' Entrepreneurship Works for Kansas initiative, RedTire helps soonto-retire business owners find qualified alumni to purchase and perpetuate their businesses. The school won a grant to implement the program from the U.S. Department of Commerce and the Economic Development Administration. Since RedTire's launch, between 50 and 60 alumni from Kansas schools have shown interest, and about 45 companies have signed on, including pharmacies, manufacturing companies, a livestock operation, and a plastic injection molding company. Many generate more than US$750,000 in annual revenues; the plastic injection molding business generates more than $5 million. "These are not insubstantial businesses," says Meyer. The center places a priority on businesses in rural areas in industries that have the most impact on the regional economy, such as agriculture and manufacturing. Eventually, the program might be expanded to include restaurants and retail stores. How It Works 72 November/December 2013 BizEd Branching Out The center hopes to share the RedTire model with universities nationwide. "The succession problem is not isolated to Kansas, especially as baby boomers continue to retire," says Meyer. "We can take the burden of succession off their shoulders, so they can make decisions based on what's best for the business. Otherwise, too many wait until the eleventh hour, when they have no alternatives and must shutter the business. Then, everybody loses." To learn more, visit www.redtire.org. ISTOCKPHOTO/TH I N KSTOCK The Center for Entrepreneurship publicizes RedTire through local media and industry groups with ties to KU's schools of business, pharmacy, veterinary medicine, and agriculture. It not only sends mailings to KU alumni, but works with other colleges and universities in the region to reach their alumni as well. Once a business indicates interest, MBA and undergraduate business students analyze its operations based on criteria such as sales, location, debts and assets, and liquidity. Each business must be viable to qualify, says Meyer. "We don't want new managers to have to fix a business that's not profitable." Potential sellers and buyers go through identical screening processes so the center can achieve the best match. Once the center identifies three to five candidates qualified to buy a business, the seller meets each one and makes a choice. The center helps the chosen buyer secure financing and provides ongoing mentorship and business training. It also requires the seller to stay with the business for one to three years after the sale to acclimate the new manager to its operation.