"The Man, The Mission, The Passion" Husband, Father, Attorney, CPA, Steward Leader, Entrepreneur, MBA, Author, Builder, HBS OPM 25 Class, Mentor, Teacher

Exit Strategies, Economies of Scale, and Good Reads

Buy Hold And Sell Signpost Representing Stocks Strategy

Hello, Mr. Collier,

I hope all is well with you!

As always I want to express my sincere gratitude for you taking the time to answer my questions.

Do you believe every investment should have an exit strategy?

Yes. Would you jump from a plane without a parachute? You may never choose to execute your exit strategy; you may love and cherish your investment till the end of time (or death taxes force your kids to sell) but you should always, always have a way out. Among other things, there are times when an illiquid investment can be a millstone around your neck, owning you more than you own it. Furthermore, the value of many investments is very cyclical. I’ve a friend event who owns an RV dealership; when gas prices are low and times prosperous and folks up for living their vacation dreams, it is a very good business that could be sold for an attractive multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Come the inevitable recession or spike in gas prices, I suspect the franchise value of that business is greatly reduced. This friend is of that certain age where retirement looms and I’ve suggested that now (low gas prices, decent economy) would be a good time to exit, not when a random health event, possibly ill-timed re the economy, makes it more of a necessity.

Furthermore, if you have an investment/business that requires your presence in order to be profitable, you don’t have an investment or a business, you have a job. A business is profitable (perhaps less but still reasonably so) whether you are there or not.

I often hear people saying it takes the same amount of time to do a smaller deal like 12 units as it does for big a deal like 100 units. Would you say that is true?

Yes, legal, financing, contract negotiation, travel time, and doc prep time requirements for big deals and small deals are remarkable similar. Risk profile and resources requirements differ of course and things like unit inspections and lease review are almost exactly linear.

What are some recent books you’ve read or are reading?

The Collier Companies RCM’s (Regional Community Managers) have an ongoing Book Club; just finished ‘Taking the War Out of Our Words: Art of Non-Defensive Communication’ by Sharon Strand Ellison and currently reading ‘Success Principles: How to Get from Where You Are to Where You Want to Be’ by Jack Canfield. It is well written; the truths and principles he espouses are timeless. I first encountered them in Tony Robbin’s ‘Unlimited Power’ and ‘Awaken the Giant Within’. Every author shares their personal stories to tell to illustrate lessons, each perspective helps me learn and re-learn at an ever deeper level.

As always, I share what I most want/need to learn. – Nathan S. Collier

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