Consider selling turn key shop. Need advice. - Page 2
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  1. #21
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    Quote Originally Posted by SND View Post
    Well, you have the rare buyers that can bring a suitcase full of cash and have money in the bank to buy it outright VS. those who will have to finance their portion while at the same time expecting the ex-owners to hold much of the paper for years to come and a high risk of not seeing your money if new owners drive the place into the ground. I know of such a situation taking place, it'll be interesting to see the outcome when its all done.

    I musta missed the werd "no" in your post.


    ---------------------

    Think Snow Eh!
    Ox

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    I think you have some good replies and information.
    As I have purchased a few shops over the years and combined them into my existing businesses then after 24 years I sold my business I have a pretty clear view from both sides.
    First, do not finance the sale yourself unless you personally have known the buyer for years. You are selling depreciating assets and if not maintained you could be holding a note on worthless machines that can't be used to make money to pay you back. You also have the risk of buyer defaulting for other reasons.
    Second you can't sell a company for more than it will provide a reasonable return on investment. Just because you might have 2 million in current value of equipment and tooling, no business person is going to pay that for the business unless it's generating 200-300k in true profit after ALL expenses and his salary ( if he works in the business) is paid.
    This is why most shops are sold at auction or as a whole but based on current asset value only.
    Probably not what you are wanting to hear but it is how most business people look at values of a shop.

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  4. #23
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    I have gone trough all the responses and all are valid with good information. I also read the other thread which has good info as well. I will keep all this in mind and determine what the next move may be. But for now I will most likely keep things as they are. Thanks again for the input it was very helpful.

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  6. #24
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    What is the best way to advert a shop to buyers that are looking for a turn key machine shop solution ?

  7. #25
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    Quote Originally Posted by solidworkscadman View Post
    What is the best way to advert a shop to buyers that are looking for a turn key machine shop solution ?
    Probably word of mouth would be my guess as to advertising. But, I would think a complete shop sale would have to show very high profit margins, a dedicated, long term, talented workforce along with a solid customer base. Otherwise what's the point, you might as well start your own shop?

    Two complete shop sales I'm aware of locally failed within a couple years, mostly because they couldn't exist without the leadership of the founders.

    When I wanted to sell my first business I told my best customer. They found me a buyer which provided them with a continuing supplier. That was thirty year ago (that business is currently for sale by its 3rd owner, they all f'up a part of it so it's practically worthless now).

    More recently, I've down sized to semi-retirement, I sold three customers turn key machine and tooling setups for their specific parts. That worked well for me and them, they didn't have to buy more than their needs and left me with machines for my needs.

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  9. #26
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    Seems like with 9 employees and turning only 1.4 mill it is close to breaking even. If you can walk away with your 3 1/2 years income and with not much loss you will be lucky..

    Production contracts might have been better that prototype jobs.

    10% return would be only good if a manager could run it.. not if the buyer had to turn handles and chase work..
    Agree to not holding mortgage on shop

  10. #27
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    I dunno, with 5 main machines and 1.4 million in gross income, that's $140 per machine per hour average assuming 2000 hours. For prototype work where programming and setup dominate that seems pretty okay to me, assuming prototypes are tiny widgets with minimal material cost, rather than 500 pound chunks of titanium that get faced off and four tapped holes.

    The owners working themselves to death is problematic from a valuation standpoint, but I think it's a little unfair and unrealistic to be talking this enterprise down. They're new. I wasn't doing 1.4 million three years in and I was working crazy hours too.

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  12. #28
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    Pretty sure you gotta remove the material and any outside services from that 1.4M at the very least, and depending on the type of work that can make a pretty big dent.

    Plenty of us spent our first 10+yrs in business just trying to get to a point where it starts to make some money and not just earn a little wage that puts food on the table and keeps the lights on while every other cent goes to bills/shop.

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  14. #29
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    Machinery should all be paid off in 2-3 yrs approximately if we keep going at the pace we are now.
    In other words your company has negative value. Unless the name is worth something I don't see anyone coming in to buy it.

    If I were in your situation I would absorb the business while the retirees collect their share of the profits. In exchange for you taking it over they get phased out in a few years.

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