What's new
What's new

Buying a machine shop business

  • Thread starter Admin5
  • Start date
  • Replies 0
  • Views 16,175
A

Admin5

Guest
Posted by PHIL IN mt on November 27, 00 In Reply to: Buying a shop posted by Greg (from the WWWMachine Shop forum)

: There is a well established shop in town that is rumored to be for sale. Can anyone give me some advise on how to proceed to purchase. I have lots of questions and need answers or resources to get answers. What price would be fair? How do I tell if it is profitable and if so how profitable? What accounting info should I review and for how many years? Is it a good idea to retain the owner for a period of time as a consultant? If so, how much should he be compensated? What performance numbers should I be concerned with? Lots of others. PLease help. I would prefer direct email. Thanks in advance for your kind and generous advise.

GREG<
I own a large machine shop montana going on 20 years now
There are a lot of ways to go broke in this trade.
You will have to be able to do any job that your
help is expected to do, that means that you dont
get to sit in the office, ypu will have to be the
machinest,salesman,floor sweepper, ect and you will
work with little or no wages for quite a few years.
The owner that you are buying the shop from doesnt
have to make payments its paid for so he takes home
the profits, you will have to give this to the banker.
you will also find that the old owner has done alot
of work at a give away rate because we doesnt need
as much profit as you will, and when you raise your
rate to pay the bills your cust. will have a much
loalty as a sailer on leave. you will also get a lot
of the dead beats the the old owner wouldnt work for
but you being the newboy on the block you wont know
about them until thay in to you 1000.00s. Also
the help will be paid a lot more than you pay your
self. some of them will leave as soon as you take
over, some to start there own shops and some will
go to the other shops in town ( there goes the cust.
list that you paid for in the blue sky) also there
are very few good machinest in the job market so tring
to find help is next to imposable and boy do you
have to pay dear for them, and thay will not work overtime.
What I would do is keep your day job, buy some good
machines and work nights and weekends se if you are
cut out to have a shop then go from there....Phil



Posted by David Powell on November 27, 00

Sir, Unless you have previous business experience in another field I would suggest that you see if you can find work which you can do competently and quickly in your home workshop and then see if you enjoy it and if you can make a reasonable amount from your endeavours. If you find success then maybe you can make a success of a full time business. However, if you already have a good job with a reasonable income and enjoy your home shop as if it is your kingdom then perhaps you ar better off not trying to run a business. I treat my home workshop as my insurance policy, should times get hard I reckon I could make a living there but in the meantime I am happy being someone elses employee and getting on with my Model Engineering projects at home meanwhile.Good luck whichever course you take.



Posted by Bo Seppenfield on November 27, 00


Greg,
A machine shop is unlike most businesses in that
the owner is what most of the customers are buying.
If the owner goes elsewhere, a lot of the customers
will too. Thats why a machine shop isn't worth any
more than its assets as somebody pointed out earlier.
I'm talking about small job shops here, shops that
make and sell there own product are a different beast.
I've had my own shop for three years now and really
enjoy the independence that comes from being your own
boss but in that time I've seen a half dozen shops in
my area go tits up. The two primary reasons are 1)The
owner wasn't a machinist and 2)They tried to compete
with CNC shops using shapers and obsolete machinery.
Now don't get me wrong, You can make a mint even
nowadays in a small shop using only conventional
equipment but NOT on multiple piece part runs of
any complexity. To make a go of a conventional shop,
you have to do it on onesy-twosy jobs like prototypes
and fixtures which makes the skill of the owner at least
equally as important as his ability to run a business.

Posted by Erik Graham on November 27, 00

I own a small business and I agree somewhat with "25 Years" but I differ in one respect. My accountant has a mantra that he repeats regularly, liars figure and figuires lie. Unless you have a strong back ground in finances it could be difficult to truly assess the worth of the business. A strong word of advice on your own intentions. If you are keen on owning this business take the bull by the horns and ask if it is for sale. If the current owner is not convinced that you are not the right buyer then he might not sell it to you. I am very loyal to my staff and my clients and even though I would hope to sell my business some day it won't be to just anyone. My goal would have a prospective buyer work for me for a period of time. This allows all parties to get a realistic view of whether the "marriage" is a good one. Lot's of luck, Erik
 








 
Back
Top