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    Default Buying a Product “Line”

    I have the opportunity to buy a product line from a gentleman. I have bought the product on several occasions from him and have refrained from making the product out of respect. He is now offering the product line and the machine, programs, fixtures and tooling.

    I am only interested in the fixtures and tooling related to the product line, but he understandably wants to sell it as a package.

    He has valued the fixtures and tooling at about 1/5 the package price, the remainder being the machine. He currently has orders for about 1/5 the package price.

    I already make similar products and had planned to expand once he had ceased production. On one hand, purchasing would eliminate a competitor and give me a jump start on expanding my product line. But then I have a machine that I don’t want and will have to sell, as well as moving it across country.

    Additionally a concern is the tooling and fixtures. You never really know the quality until you setup and run them. I could be buying crude setups that won’t handle how I would machine them, and then I have really gained nothing, other than “brand” recognition from carrying the name.

    Thoughts? I know it’s vague, sorry.

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    Quote Originally Posted by Fal Grunt View Post
    Additionally a concern is the tooling and fixtures. You never really know the quality until you setup and run them. I could be buying crude setups that won’t handle how I would machine them, and then I have really gained nothing, other than “brand” recognition from carrying the name.
    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.

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    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.

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    Mckean machinery could probably sell your excess machinery, where they sit.

    ring Up John Brand and inquire.

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    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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    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?

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    Quote Originally Posted by Fal Grunt View Post
    On one hand, purchasing would eliminate a competitor and give me a jump start on expanding my product line. But then I have a machine that I don’t want and will have to sell, as well as moving it across country.
    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.

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    Quote Originally Posted by Fal Grunt View Post
    ...... On one hand, purchasing would eliminate a competitor and give me a jump start on expanding my product line.

    ......But then I have a machine that I don’t want and will have to sell, as well as moving it across country.
    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

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    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?

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    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

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    Lots of great posts, lots of food for thought.

    Quote Originally Posted by Hazzert View Post
    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.

    Quote Originally Posted by lionelt View Post
    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.

    Quote Originally Posted by digger doug View Post
    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.

    Quote Originally Posted by Ox View Post
    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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    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.

    Quote Originally Posted by Comatose View Post
    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

    Quote Originally Posted by Insert View Post
    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.

    Quote Originally Posted by CarbideBob View Post
    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.

    Quote Originally Posted by Spruewell View Post
    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.

    Quote Originally Posted by The Dude View Post
    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.

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    Actually, I have been in a similar situation a while back [and this will actually be covered soon in my shop thread - timing being what it is] and the seller was afraid of showing me the fixtures - afraid that I may just see how they were dooing it and then run home and make my own. This had happened to them previously on other jobs.

    Not sure how that would fit in your situation???



    Glad to hear of the respect.


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    Ox

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    Are we talking 10k or 100k or???

    Are you mortgaging the house or just spending more than you can get out of the couch cushions

    If you do not want the machine, do not buy it.

    If you do not want the fixturing, do not buy it.

    find out what the price is for him to piss off and put a magnet to his hard drive. he can worry about resale on the machine


    If he is unrealistic about his price and terms, just make the product you want to make, how you want to make it.

    It is not necessary to be a sap to be a good and honest businessperson.

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    Having bought, moved, and merged 2 companies (including product lines, clients, inventory, and tools, but not including staff or real-estate), I can say you MUST have time and space or you'll be in over your head. Start by emulating what they are doing and make changes from there. Their machine might have a feature or size range that yours doesn't. Once you KNOW what it takes to do the job, you can streamline redundancies and make changes. The rest is just "business" to sort out on paper. IE, can you make a profit, maintain or improve the products, and keep current customers happy.

    The stuff that is worked out separate from the desk: where does it all go? how were they doing it? how will you do it? all takes time and space. If they took care of the books, physical assets, intellectual assets, and customer base, your job will be easier. but if one or more of the above suffered, you might be able to save it, but you have to see and address the issues separately with enough time and resources. The problem companies/products can make you money if you have the vision and patience to fix them.

    Also helps to know from the start: are you doing this just to make money or because you "enjoy" it. It's best if it's a healthy balance of both, but that balance should effect your decisions or you'll end up making money while wanting to kill yourself, or buried in debt with a smile on your face.

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    I forgot - doo you get a web domain with it?
    This could be worth as much as all the rest!


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    Ox

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    Well, sometimes these things have a way of working themselves out.

    Thank you all for your input, it was a learning experience and I really appreciate the advice.

    I received an email the the machine and product line are sold pending receipt of funds.

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    Quote Originally Posted by Fal Grunt View Post
    I received an email the the machine and product line are sold pending receipt of funds.
    Good. The part where you said "have to go to the bank" made me think "NO !"

    Fuck banks and the horses they rode in on.

    Now you can go make a better part in good conscience, and crush that greedy numbskull like a bug

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    Quote Originally Posted by Fal Grunt View Post
    Well, sometimes these things have a way of working themselves out.

    Thank you all for your input, it was a learning experience and I really appreciate the advice.

    I received an email the the machine and product line are sold pending receipt of funds.
    Great news....Now can you tell/show us just exactly WTF product it was ?...

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    I wonder if the person that bought it is a member here.

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    Quote Originally Posted by Fal Grunt View Post
    Well, sometimes these things have a way of working themselves out.

    Thank you all for your input, it was a learning experience and I really appreciate the advice.

    I received an email the the machine and product line are sold pending receipt of funds.
    Excellent. Now you're free of all ethical considerations WRT competing in that market. Go for it.

    PDW


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