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Sustaining the economic wellbeing of rural Kansas

Sustaining the economic wellbeing of rural Kansas. Special presentation to:. The Problem. Small/Medium sized businesses are being shuttered due to owner retirement and lack of successor Impact: Loss of equity for owner Loss of tax base for community Loss of business services Need:

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Sustaining the economic wellbeing of rural Kansas

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  1. Sustaining the economic wellbeing of rural Kansas Special presentation to:

  2. The Problem • Small/Medium sized businesses are being shuttered due to owner retirement and lack of successor • Impact: • Loss of equity for owner • Loss of tax base for community • Loss of business services • Need: • Educated, trained, mentored replacement management

  3. The Solution RedTire will act a matchmaker between rural business owners and highly qualified graduates from various KS universities who have the expertise and ambition to run those businesses. RedTire is a new venture from KU Entrepreneurship Works for Kansas, an initiative from the KU School of Business, working cooperatively with all Regents Universities in the state of Kansas

  4. RedTire Function Five primary functions: • Screen businesses to identify purchase opportunities • Screen/evaluate replacement management • Match replacement management teams and business opportunities • Help navigate ownership transition of new owners • Provide on-going mentoring support of replacement management team

  5. RedTire Addresses a Large and Growing Business Segment (000’s) 30% fit target sales of $750K+ 54% don’t have succession plan 40% plan to retire w/in 5 years 83% family owned # of KS businesses Sources: Mass Mutual,<www.usdce.org/fbf/downloads/2007_MM_familybusiness.pdf>“2007 American Family Business Survey”, 2007. US Census Bureau,<http://www.census.gov/epcd/www/smallbus.html>2002, Statistics of US Business, 2002

  6. Candidate Company Profile • Any business that provides an essential service to the community • Any business which employs or has the potential to employ many Kansans • Owner(s) retiring in 3-5 years; willing to mentor incoming management • Sales revenues of $750K + • Pharmacy, Health practices/clinics (human and animal), Manufacturing, Ag Support, Grocery, others considered • Ideally not retail

  7. Transfer of Values and Profits • Outgoing owner gets half upfront, half back ended as incentive to stay/mentor incoming mgmt team • Incoming team assumes responsibility for loan repayment from company profits • Optionally RedTire earns 10% to enable economic self sustainability

  8. Funding Sources • Acquisition funded by local bank loan (80%-90%), replacement management (10%-20%) • Acquisition of portfolio companies will be completed via the USDA Business & Industry Guarantee Program: • Loan guarantees 80%-90% of local bank’s purchase loan • Replacement management team provides remainder • Interest rate negotiated with local bank • Other funding opportunities: • Local banks • Private equity participants • Regional/National banks

  9. Organizational Structure Local Sources Econ Devel RedTire is entitled a 501 (c) 3 due to its association with the KU Center for Research, which will also provide backroom financial and grant administration support

  10. RedTire Board of Advisors/Governors • George Hansen: • Private investor, former CEO Corporate Lodging, senior manager at CarStar, Thorn EMI and Denny’s, Inc. • Pat Healy: • Founding partner of C3 Capital Partners; senior partner at Mayer, Hoffman, McCann (precursor to CBIZ) • Tony Rock: • Founding partner of Cimarron Infrastructure Group, former principal with Kansas City Venture Capital • Bill Taylor: • Former partner Ernst & Young; board member: Citizens for Higher Education , Tamarack Funds • Jay Meschke: • President, CBIZ Human Capital Services; past president Kansas National Bank • Mike Michaelis: • President, Emprise Financial Corporation, Chairman, Emprise Bank • Linda Sadler: • CFO KUCR; VP at Flathead Valley Community College and Eastern Oklahoma State College • Ron Ash: • KU School of Business, MGMT Area Director, PhD Industrial & Organizational Psychology • Bruce Davison: • Partner, SNR Denton; lead and tax counsel specializing in M&A, business structure, estates • Kent Glasscock: • President, National Institute for Strategic Technology Acquisition and Commercialization • Wally Meyer: • Director, KU Center for Entrepreneurship

  11. Milestones • Launched (7/12) • Company candidates showing interest, due to: • Publicity • Alliances with several business brokers • Targeting optimal industries with mailings Q4 • Working with K State on potential ag related candidates • Replacement management candidates: • Compiling data base of KU alums for targeted mailings • Leverage new Rural Opportunity Zone state program • Alums target of magazine feature (Sept) and direct mail campaign (Q4) • Will begin multi-campus publicity campaign 1/13

  12. Today’s Needs • Think about potential candidate companies (right now, I’ll wait) • Direct them to: • http://www.redtire.org/ • Us: 785-864-1016 (Denton Zeeman); 785-864-7583 (Wally Meyer) • Take a brochure/take many: distribute to potential candidate companies

  13. Summary We believe: • RedTire can be an effective address to the state and regional small business shuttering crisis • RedTire can enhance rural community value and quality of life, potentially reducing current brain drain and population deterioration • RedTire can provide excellent experiential learning opportunities for all KS university students in due diligence, management behavior, operational disciplines • BUT, we need your help • (and so do your retiring business owners)

  14. Appendix http://www.redtire.org/

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