Acquiring Minds: When Buying a Retail Business Makes Sense
Episode Release Date: April 7, 2025
Host: Will Smith
Introduction
In the latest episode of Acquiring Minds, host Will Smith delves into the intriguing journey of Ken Allison, the owner of Mr. Liquidator, a distinctive mattress retail business. This episode explores the nuances of acquiring a retail business, highlighting the challenges, successes, and strategic decisions that shape acquisition entrepreneurship. Through Ken's story, listeners gain valuable insights into evaluating, purchasing, and scaling a retail operation.
Ken Allison's Background
Ken Allison's entrepreneurial journey is anything but conventional. Starting his career as a firefighter in Vancouver, Canada, Ken's dedication and teamwork laid the foundation for his venture into business ownership.
Ken Allison [06:09]: "I started working and building my own internal reputation around the fire hall. I loved every aspect of being a firefighter—responding to emergencies and being part of a team."
Despite his commitment to firefighting, Ken recognized limitations within the fire service's promotional structure, prompting him to explore alternative career paths that offered growth and autonomy.
Journey to Acquisition Entrepreneurship
Ken's transition from firefighting to business ownership was inspired by a friend who successfully franchised a soccer company, Soccer Shots, in Canada. This exposure ignited Ken's interest in acquisition entrepreneurship—a path that allows entrepreneurs to purchase and manage existing businesses rather than starting from scratch.
Ken Allison [07:47]: "I pitched the idea to a co-worker who was a skilled salesman, and he was all in. We went through the process of bringing the Soccer Shots franchise to Canada, becoming the first Canadian franchisee."
Balancing his full-time firefighting duties with building a franchise emphasized Ken's strong work ethic and strategic vision.
Acquiring Mr. Liquidator – Why and How
Ken's foray into the mattress retail industry led him to acquire Mr. Liquidator, a warehouse-style mattress store with unique operational dynamics. Initially, Ken was skeptical about purchasing a business with such an unconventional name and model.
Will Smith [00:00]: "We all know that retail businesses are best to avoid. But see if the business that today's guest acquired doesn't break the frame."
Ken's interest was piqued by Mr. Liquidator's impressive financials: nearly $2 million in revenue and close to $500,000 in Seller's Discretionary Earnings (SDE). Additionally, the store boasted 700 five-star Google reviews and a robust Facebook following of 35,000 followers.
Business Model of Mr. Liquidator
Mr. Liquidator distinguishes itself from typical mattress retailers through its streamlined, warehouse-based operation. Unlike traditional stores that focus on customer service and extensive showroom experiences, Mr. Liquidator offers:
- Immediate Ownership: Customers can purchase and take home mattresses on the same day.
- Cost Efficiency: Operating in a warehouse reduces overhead costs, allowing for competitive pricing.
- Limited Staff: A lean team manages the entire operation, enhancing efficiency.
Ken Allison [23:20]: "It's in a warehouse. It's a newer warehouse, front-facing, on the street with nice windows. We keep our costs down, which is why the model works."
The business exclusively sells Serta and Beautyrest mattresses through a special wholesale agreement, positioning Mr. Liquidator as the largest dealer of these brands in British Columbia.
Financial Overview
The financial health of Mr. Liquidator was a critical factor in Ken's decision to acquire the business. In 2024, the store achieved $1.9 million in sales from one retail location, averaging approximately 500 mattress sales per month.
Ken Allison [31:05]: "In 2024, the business sold $1.9 million worth of mattresses from one location, with about 2,500 mattresses sold annually."
The business operated with a net margin just under 25%, maintained by steady operating expenses of around $40,000 per month. Key financial strategies included:
- Bulk Purchasing: Importing mattresses in large quantities to benefit from economies of scale.
- Efficient Inventory Management: Holding significant inventory levels to meet demand without overextending.
Challenges and Learning from the Acquisition
Despite the promising financials, acquiring Mr. Liquidator came with its set of challenges. The onset of COVID-19 was particularly impactful, leading to operational disruptions and ultimately forcing Ken to sell his initial business during the pandemic. This experience provided Ken with invaluable lessons about due diligence and the importance of thorough financial scrutiny.
Ken Allison [12:08]: "Covid shut us down for a little bit, and we ended up selling the business in the first two months of COVID."
Post-sale, Ken recognized the significance of maintaining clean financial records and avoiding the commingling of personal and business expenses—a misstep that complicated his previous business's valuation.
Ken Allison [43:09]: "We haven't taken a cent. We realized it was a bad idea to roll personal expenses through the business."
These lessons underscored the importance of transparency and financial integrity in business acquisitions.
Deal Structuring and Financing in Canada
Financing the acquisition of Mr. Liquidator involved a strategic blend of upfront payments and seller financing. In Canada, banks typically finance up to 75% of a purchase price for business acquisitions. Ken structured the deal as follows:
- Upfront Payment: 88.5% of the purchase price was paid at closing.
- Seller Financing: The remaining 11.5% was handled through a Vendor Take-Back (VTB) note with a 5% interest rate over five years, culminating in a balloon payment.
Ken Allison [76:32]: "We structured the deal with 88.5% paid at close and 11.5% as a seller's note with a five-year term at 5% interest."
Ken leveraged relationships with Canadian banks and the Business Development Bank of Canada (BDC) to secure favorable financing terms. This approach mirrors the SBA loan structures familiar to American entrepreneurs, highlighting the adaptability of acquisition strategies across borders.
Future Plans and Expansion Strategy
Looking ahead, Ken envisions expanding the Mr. Liquidator model beyond its current Vancouver location. His strategies include:
- Pop-Up Shops: Testing new markets by setting up temporary retail spaces to gauge demand.
- Wholesale Expansion: Supplying mattresses to smaller motels and hotels that lack direct wholesale agreements with major manufacturers.
- Strengthening Supplier Relationships: Enhancing partnerships with Serta and Beautyrest to secure better terms and support for expansion.
Ken Allison [71:03]: "Our plan is to run pop-up shops and expand our wholesale capabilities, supplying smaller motels and hotels."
Ken also recognizes the shifting landscape of the mattress industry, noting a potential decline in online sales as consumers seek tactile experiences before making purchases.
Insights and Lessons Learned
Ken Allison's acquisition journey offers several key takeaways for aspiring acquisition entrepreneurs:
- Due Diligence is Paramount: Thoroughly vetting business financials and operational practices is crucial to avoid unforeseen challenges.
- Financial Integrity Enhances Valuation: Maintaining clean and transparent financial records can significantly impact a business's valuation and attractiveness to buyers.
- Adaptability Fuels Success: Being open to learning and adapting operational models can transform challenges into opportunities.
- Strategic Financing is Essential: Understanding and leveraging local financing structures can facilitate smoother acquisitions.
Will Smith [44:22]: "If you don't feel like you could fully trust the seller, you should walk because it's too much risk."
Ken's balanced approach—trusting his instincts while mitigating risks through strategic planning—demonstrates a pragmatic path to successful business acquisitions.
Conclusion
Ken Allison's story on Acquiring Minds encapsulates the essence of acquisition entrepreneurship—leveraging existing business frameworks to build upon proven models. His pragmatic approach to overcoming challenges, optimizing financial strategies, and envisioning scalable growth offers a roadmap for entrepreneurs aspiring to acquire and excel in retail business ownership.
For those interested in exploring similar acquisition opportunities or seeking guidance on buying a retail business, Ken Allison is open to connecting and sharing his experiences.
Ken Allison [85:16]: "I'm always willing to lend a hand when I can."
Connect with Ken Allison:
LinkedIn: Ken Allison
Email: Ken@MrLiquidator.ca
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