If your dream is to own a combined car wash/ice cream store, for $105 you can have a one-in-6,000 chance of making it come true in Hillsdale, Mich.
Perhaps, running a restaurant is more your thing. Brush up on your writing skills because a well-crafted essay and $200 could earn you a historic tavern in Van Wert County near Lima.
In a clear sign of tough financial times, two businessmen who are 90 miles apart in separate states are taking unusual routes to sell their businesses.
Both say that prospective buyers of their businesses keep getting denied loans by banks, so they have resorted to contests to sell the Vanity Car Wash in Hillsdale, and Caballero's Landeck Tavern in tiny Landeck, Ohio.
Experts say holding contests to sell property is not unheard of, but it is unusual for business sales.
“This has been popping up fairly frequently over the last two years — but with homes,” said Ted Hart, a spokesman for the Ohio Attorney General's office. “This method is fairly unusual for selling a business.”
Mike Stamler, a spokesman for the U.S. Small Business Administration in Washington, said using a contest to sell a business has occurred occasionally nationwide but hasn't been a growing trend, even as lenders are more restrictive in approving loans.
A contest, he said, is one of many creative options some owners have used to unload their businesses.
In 2007, Brenda Bou-Sliman, of Port Clinton, Ohio, attempted to use an essay contest to sell her local ice cream store, Brown's Dairy Plaza. She hoped to collect 3,000 essays, along with a $250 entry fee, with the winner getting the ice cream store and a house.
But the contest failed to collect enough entries and county records show she still owns the store, which apparently closed. The owner could not be reached for comment.
Hillsdale resident Corey Burke, 29, said he has tried to sell his car wash for three years. “We had a few lookers, but really no buyers because with the economy the way it is, everything has slowed down,” he said.
He wants to be a fire fighter and knows he must relocate to a larger city to become one. Keeping the business isn't feasible, so without a firm buyer, he decided to hold a contest.
For $105, entrants get a key and $100 worth of car washing services at Vanity Car Wash. They also are automatically entered into a drawing with the winner getting the business. Information is available at www.keystoyourbusiness.com.
“You can't raffle real estate in Michigan, but if we sell a service, we could pretty much give away the blue sky,” said Mr. Burke, who estimates his business is worth between $475,000 and $525,000.
“So [this is] people really purchasing $100 worth of car washing … and one lucky person will get the business.”
Mr. Burke said he is looking to receive 6,000 entries before holding a drawing in May, 2010. He has received nearly 3,000 so far, he said. “Six thousand is our goal, but if for some reason we struggle around the 5,000 mark and May comes, then we may hold the drawing right then,” he said. Five thousand entries would be the minimum he would accept, he added.
Meanwhile, in Van Wert County's Landeck, which is a half-hour drive west of Lima, Kyle Caballero, 46, is looking for 3,000 writers who will submit an essay — and $200 entry fee — describing why they want to own his 125-seat restaurant. He said he will settle for 2,200 entries.
He has owned the restaurant since 2001. He would like to sell the business and return to his native Baton Rouge, La.
“I had had a couple of different individuals look at the restaurant or were interested, but they couldn't get financing. They were getting turned down for the craziest reasons,” Mr. Caballero said.
He got frustrated, got an attorney, consulted a tax expert, and found that an essay contest, which uses skill, was legal. The entries are being judged by an independent panel of seven journalists, and a marketing firm is running the contest. The rules can be found at www.winmyrestaurant.com.
Waiting for entries
Mr. Caballero's contest is set to end Oct. 31. So far, he has received entries from seven states, but he refuses to disclose how many. “We don't have a ton, but we have more than we thought we'd have at this time. And most research shows you won't get the bulk of them until the end of the contest,” Mr. Caballero said.
The business has been valued at $500,000, and Mr. Caballero said it has averaged more than $450,000 in annual sales the last nine years. The Landeck Tavern has a dining room, banquet room. 17,000-square foot patio, sand volleyball courts, and a staff of 13 employees, mostly part-time.
“If I don't get the 2,200 entries, I can extend the contest another 30 days, or give people their money back less $20 for the costs of running the contest.
Mr. Hart, of the attorney general's office, said Ohio closely watches contests like Mr. Caballero's to make sure they are games of skill, and not chance, like a raffle.
“The other concern we have is from a consumer protection standpoint. We would want to see that all of the details are clearly disclosed, and as far as judging, what happens to the entries and what are the deadlines,” Mr. Hart said. “If you're going to do something like this, get an attorney and proceed at your own risk. We have received complaints on these things before and we do investigate them.”
Scott Wood, assistant managing director of the Small Business Research Board, in Buffalo Grove, Ill., said there are many concerns that the winners of such contests ought to recognize.
The type of sale diminishes the value of the business, he said, and vendors and customers may want a say in how the business ownership should proceed. Current employees may be skeptical of working for an inexperienced owner, he added.
Bill Wersell, director of business development services for the Toledo Area Small Business Association, said the winner of either contest ought to consider hiring a consultant or get business counseling immediately, otherwise “they are walking into a potential nightmare if they don't have a business background.”
Winning a business is different from building one, he said. Running a small business requires both operational management and financial management skills, he said. And most first-time small business owners have a poor understanding of finances, he said.
“For anyone who is contemplating going into business and they don't have a small business ownership background, if they don't get some help, they could lose it all pretty quickly,” he explained.
Contact Jon Chavez at:email@example.com 419-724-6128.