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Business owners look for the write stuff

When you're selling a business and the going gets tough, the tough devise essay contests

Posted: Thursday, January 30, 2003

Jane Walters could have put her Mail Boxes Etc. store in Juneau on the market and sold it the same way most business owners do.

In today's economy, though, selling a business isn't as easy as it sounds. It's also not that much fun. So Walters decided to join several business owners across the United States who are transferring ownership of their businesses by way of an essay contest.

"It's an exciting and interesting way to do it," said Walters, who opened Mail Boxes Etc. on Willoughby Street in the spring of 1996. "It's a way to make someone else's dream come true."

Mail Boxes Etc. is a large retail shipping, postal and business services company. The Juneau franchise caters to businesses and cruise ships, processes bulk mail, and stores and distributes publications for companies and organizations.

Walters' contest opens Saturday, Feb. 1, and will close April 30, if the minimum of 2,500 entries is received. Entries cost $200 plus a $30 administrative fee, and must include an essay of no more than 250 words on why the entrant wants to own a Mail Boxes Etc. in Juneau and what the entrant will bring to the business should he or she win.

"We're looking for someone who has the desire, the enthusiasm, the passion, really," Walters said.

Mail Boxes Etc. joins the Bear Creek Cabin and Hostel in Haines and the Kenai Lakes Cabins and Tackle in Cooper Landing as Alaska businesses seeking new ownership via essay contests.

"It just seemed like a really good opportunity to own some land, own a business and own a home for a relatively small amount of money," said Trish Ramme, an Anchorage paralegal who entered the Bear Creek contest this week.

Walters' inspiration for the contest is "The Spitfire Grill," a 1996 movie in which a business owner holds a similar contest.

The state has no restrictions on essay contests for ownership of a business, as long as it is truly an essay contest and not a game of chance.

"It would be great if it could just be a raffle," said Sandy Hawthorne, a former Juneau resident who owns Kenai Lakes Cabins and Tackle. Hawthorne, her husband, Cameron, and their five kids have owned the business for five years.

"We have a bunch of kids and decided it will be time to move on," she said.

The Hawthornes' essay contest is based on at least 1,500 writers submitting $400 and an essay stating how owning the business will change the entrant's life. The contest opened in November 2002 and will accept no essays after Nov. 1, 2003. So far, the contest has received no entries.

"I think everybody's waiting until the last minute," she said.

Like Walters, the Hawthornes plan to select 100 finalists in the contest, then will turn the essays over to an independent, anonymous panel of judges. The Hawthornes have recruited two residents of Cooper Landing as judges. Walters has seven Juneau residents on her panel. Neither of the owners will serve as judges.

"I just don't want there to be any question about whether this is fair," Walters said.

Brian and Laura Johnson, owners of the Bear Creek Cabin and Hostel, will serve as judges on their panel, along with five other Haines residents.

The Johnsons began the contest on Sept. 15, 2002, and originally set the deadline as Jan. 31, 2003, but they have extended it to Feb. 28. The contest rules allow the deadline to be extended in 30-day increments for six months, until the minimum of 1,000 essays has been submitted.

All three companies have Web sites devoted to publicizing the contests and thoroughly explaining contest rules. Neither the Bear Creek nor the Kenai Lakes contest has come close to reaching the minimum number of entries needed.

"Just around Christmas time we got a flood of calls from people who had their essays ready and weren't turning them in," said Brian Johnson. "They're waiting to see if it looks like we're going to get enough entries, so it becomes kind of a catch-22 thing.

"It's kind of hard to say at this point if it's going to work or not."

Walters is optimistic about getting the required minimum 2,500 entries for her contest. She has launched an e-mail campaign to spread the word and has other promotions planned.

"We're going to advertise worldwide," Walters said. She also will use a direct-mail campaign and word of mouth.

"Juneau is really good about rallying around the people that live here," Walters said. "I'm calling my friends ... and I'm counting on them giving me some good support, passing along the word."

Each contest will refund entry fees if the owners do not receive the minimum number of essays, although Walters will keep the $30 administrative fee.

"It is a lot of work, a whole process," Walters said of holding such a contest. Her administrative costs include marketing the contest and legal fees. She also will help the winner transition to ownership over a three-month period.

If successful, the Mail Boxes Etc. contest will fetch Walters a minimum of $575,000, the Bear Creek contest will take in $200,000, and the Kenai Lakes Cabins and Tackle contest $600,000.

But a person who wins a business has to pay federal income taxes on its fair market value, said local accountants. Acquiring a business worth $500,000 likely will put a person in a 38 percent or 39 percent tax bracket, leaving the winner with a tax bill of more than $200,000.

The Johnsons and Hawthornes plan to set aside 15 percent of the contest proceeds to help the winner pay for income taxes associated with the prize. That money, too, will be taxed, said accountants.

Business Giveaways in Alaska

• Mail Boxes Etc.; essay length: 250 words; fee: $230; deadline: April 30, 2003; Web site: www.alaskaessaycontest.com.

• Bear Creek Cabin and Hostel; essay length: 400 words; fee: $200; deadline: Feb. 28, 2003 (can be extended); Web site: www.alaskaessay.com.

• Kenai Lakes Cabins and Tackle; essay length: 500 words; fee: $400; deadline: Nov. 1, 2003, Web site: www.bnbweb.com/klcabinscontest/index.html.

Walters, of Mail Boxes Etc., plans to include no cash with the contest prize. Expenses involved in transferring ownership of the franchise, such as a mandatory training, also are left to the winner.

People considering entering such contests should verify that the business consistently earns rather than loses money and ensure that the business has no liabilities or debts that the winner would assume, accountants said.

Though the tax liability is sizable, the Bear Creek contest has attracted around 200 participants, said Brian Johnson.

"I pretty much tried to check some of the (tax) rules, and they're really not clear," said Ramme, the Bear Creek contest's most recent essayist. "I know (the tax liability) is pretty stiff."

Ramme chose to enter the contest despite not knowing the tax liability that would accompany a win.

"I really love Alaska and (winning) would just be a dream for me," she said.

Ramme's dream lies at the heart of why all three business owners in Alaska holding contests chose to request essays instead of trying to sell the businesses on the market. The owners want to inspire people to break the mold.

"I get so many fantastic phone calls," said Laura Johnson. "A gal yesterday, she just went on for 20 minutes about how even if she doesn't win, it helped her work on her dream. It's really inspiring."

• Christine Schmid can be reached at cschmid@juneauempire.com.



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