When the government implemented the Circuit Breaker (CB) measures last year, Joshua Lung, founder of popular spa chain Healing Touch, was distraught. He had spent the previous three years successfully restructuring the business after a failed initial public offering on Nasdaq’s OTC Markets and spending close to $1 million buying back the shares of several disgruntled shareholders.
“Images of all our outlets ‘rotting’ during CB taunted my mind, and I worried we had to wait until phase 3 before we could reopen. I had never encountered such a helpless situation despite 20 years in the business,” the 55-year-old recalls. His overseas expansion plans also had to be put on the back burner because of these developments.
Lung’s worries were unfounded. When Healing Touch opened all its outlets again, customers returned in full force. The company posted strong financial performances in the final two quarters of 2020, thanks to the post-pandemic revenge spending phenomenon and the fact that most people could not travel overseas.
The quick recovery, however, did not deter Lung from his primary aim – selling the business. “I’ve been planning my exit for many years and didn’t think I could pass on the spa business to my children. I also knew I should sell the business while it was strong and felt that our growth had peaked under my leadership. To grow it further, it was best to let it go to a stronger owner,” says Lung.
Prior to the pandemic, Lung had appointed a M&A (mergers and acquisitions) consultancy to look for buyers, but the offers he received didn’t match his expectations. Fortunately, Healing Touch’s post-CB rapid business recovery signalled to potential suitors that the company possessed a strong enough brand to ride out crises. Joyre’s Group CEO Dickson Mah was one such interested party.
“I felt that there was a lot of synergy between our companies. Besides their retail chain of TCM Wellness businesses, they had also set up an elderly care and confinement centre in Singapore,” says Lung. The two of them eventually agreed on $6.68 million in full cash for Healing Touch, which was about 25X of its 2020 earnings. If the pandemic never happened, the agreed valuation would be about 6.7X of its 2019 earnings. Lung and Mah put pen to paper on 7 June 2021, a few days after the first Phase 2HA started.
The serial entrepreneur who previously ran a steamboat store in Tiong Bahru and a VOIP (voice over Internet protocol) telecom business dished out a few hard truths about business when I asked him about his journey.
“I think a lot of business owners want to cash out eventually, whether through a trade sale or by going public. Unfortunately, many owners exit either when their businesses go bust or they are too tired to continue and just wind down without cashing out,” says Lung.
“If you want to sell your business at a good valuation, it is important that the business must prove it can operate without the founder and still be as profitable. So you must learn to build the business like how a franchise would operate. It cannot be a one man show. It is also important that the business is not merely surviving, but is one of the market leaders with a reputable brand. Just making money is not good enough.”
“Profits and dedication are the minimum requirements that keep me going in business. If the business is losing money, I will close it within three to six months. Passion alone is not enough. That is a common mistake that many business owners make.”
Joshua Lung on the importance of pragmatism in business
Lung is now firmly in the next phase of his life – retirement. He’s still keeping himself active, however, and has proven to be quite adept in the stock markets. Three years ago, he started with $50,000 in his trading account from $50,000. Today, it stands at $4 million. Lung also wants to help other entrepreneurs grow and exit their businesses. He is also thinking about collaborating with a training firm to solidify his mentorship aspirations, something that the Emyth certified business coach had been doing “on and off” for the past decade, into a proper business pedagogy.
“Profits and dedication are the minimum requirements that keep me going in business. If the business is losing money, I will close it within three to six months. Passion alone is not enough. That is a common mistake that many business owners make. They stay in business even when it is not viable and they have to sustain it through loans and foregone income,” says Lung.
“When the business is viable, you must do whatever you can to realise the full potential of the business. Build competitive advantages and constantly improve your value proposition to customers. That keeps the best entrepreneurs going. Healthy profits will follow if you do that.”