Lots of great posts, lots of food for thought.
One would think that wouldn't be an issue since you are supposedly going to be running his programs on his fixtures and your input should be to just keep it fed and press the green button.
How are his parts? Are the faces parallel, chamfers even and the holes round? If so his process must be somewhat under control.
I would be more worried that he has noticed his product being copied and has decided to get out before there is no meat left on the bone with Chinese copies flooding the market.
His parts have room for improvement, while I would use his fixturing, I would most likely completely reprogram and re tool the operations to improve. I know he did some hand fitting of parts, which I would tighten up the tolerances and remove as much fitting as possible.
This is a high dollar, low volume, consumer product. To my knowledge there are no chinese copies, specifically, it's a pretty complex piece of work, not compared to much made here, but it is not an easy part to make.
I would be wondering how many years it would take to pay of the initial cost of the whole package, and during that time how likely someone else would come into the market selling the same product.
It is an important point as to competitors. I believe there are 2-3 companies in the US and 1-2 in europe.
My
hope with the purchase would be to sell his machine, complete the existing orders, and have recouped the initial cost, within about the first year. But to get the initial investment I'm gonna have to go to the bank, so I am trying to get this all worked out in my head before I do that.
Mckean machinery could probably sell your excess machinery, where they sit.
ring Up John Brand and inquire.
Yep, I know John and Dee, that is certainly an option.
Shirley the equipment is sale-able near where it sits?
I understand not wanting the exact machine(s) that might come with a package, but if it comes at a reasonable price, you should be able to offload it at a reasonable cost?
I have also seen where someone closes up shop and wants to sell their book of business, thinking that it holds much value, when really - once they are gone, the other locals would pick it up anyhow - unless the business is sold as an opperating buinsess, whole and intact.
Many times - this sale is done with possibly no more gained than to make the "old guy" feel like his contents were of value yet, and for the younger guy(s) to feel that they have taken the high road and it will come out in the worsh.
I like the high road. The air may be thinner and your breath may be more labored, but you just don't git all those black flies that hover done at the swamps.
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Think Snow Eh!
Ox
I think this fits into your "high road" example pretty well. I'm going to make the parts regardless, but I have tremendous respect for the man, I have never been able to be one of those "its just business" people.
Surely if he's serious about selling, you could take a plane trip, set up his machine with his fixtures and programs and run some product under his supervision. That'd tell you just about everything you'd want to know, wouldn't it?
Yep, it would. Still working on the decision, whether or not it is viable... He would be happy to have me come up and run him some parts, I am sure
If you purchase it, are you going to keep selling under his name, or his name disappears and those products are made under your name on his fixtures?
If you buy everything, and sell the machine from his location, assuming to a dealer, so you don't get top dollar, how does your out of pocket expense compare to you setting up those products from scratch on your own?
If you add his products to your company(his fixtures or yours) do you have machine capacity to do your current work, plus the new work, or would you need to add a machine?
Do you think he is selling, cause he feels a threat from your current company. i.e. will he be going under soon, so no need to buy his company, it will disappear soon.
Good points, I would probably keep his name associated with the product for a few years, but long term, it would be those products under my name with his fixtures.
The issue of selling the machine is a big factor. He wants, essentially, in my opinion, market price for the machine. I'll have $3k-$4k in bringing it home. It is a wash whether I have it rigged and freighted, or rig it myself and haul it home, cost is within a few hundred. Selling it to a dealer, I suspect, I would take a swift kick in the pants, and would be more cost effective to set up on my own time.
If I add the products, I have machine capacity with my current equipment, which is why I really don't see the need or purpose to keeping his machine. The machine I use (Brother) far exceeds the machine he is using.
I am not a threat in anyway to him, he has been in business longer than I have been alive. By his own admission, he is just tired of it and no longer wants to do it.
Do not underestimate part A here. You buy customers and maybe it takes 3+ years to pay off but...
Part B, maybe with more work, in time the machine will be needed.
Tooling and fixtures all die and need to be replaced with time. I would not think these should be your focus in this deal.
Buying other companies/product lines is always risky.
I've seen people do this to the point that their IRS tax on take home pay is in the six figures. Also seen bankrupt, crushed and worse.
Above all, be sure you can afford and are willing to lose all this investment and then look for what the bright side can bring.
Bob
Part A, yes this is important to me, he has a current back log of work, existing orders, that would help pay for the purchase. I also do not have to machine the fixtures and program the parts. While the programs may NEED work, they at least are existing.
Part B, the machine is of no interest to me, in my opinion it would HINDER my production. Long term as I grow, if I need another machine, I will get another Brother.
Another excellent point, fixtures do wear out with time, and as mentioned, I do not know yet the quality of the fixtures.
If you are concerned about the quality of his machinery and tooling, ask him to send you some pictures. Is the customer base part of the deal? If so, how likely are they going to be stable, long term repeat customers?
Based on the product, and based on the name, there will be some repeat business, but this product line is not a walmart consumer product.
The ideal goal is to boil this down to "simple math". Do an NPV (net present value) analysis (okay, not super-simple but there are online templates available). Your goal isn't really to eliminate a competitor, it's to make a sound investment, right? I can't believe that this wouldn't be worth a plane trip. Evaluate the possibility of buying how he wants to sell it and then selling the machine (sounds like a non-competitor could use it?). Look at the books (he better offer that up). Factor in all your time, all your earnings, costs, etc. and see if it creates a positive NPV (but factor in the opportunity costs, e.g. what else could you do with this time & money?).
Good luck,
The Dude
Yes, time for a spreadsheet.