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  1. #21
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    18 replies and I agree with every one of them. I'll just add a couple.

    I've been off grid for short periods. It sucks. If you want to do it to feel all fuzzy warm about helping the planet, that doesn't square at all with a job in the motorsports business. If you want to do it to save money, the $.15 you pay now for electricity will only cost you about $1.50 by the time your done. But you can start tomorrow on your quest with your house. Get your experience small scale first.

    My banker figures $20,000 per adult and $10,000 per child living expenses, and thats with employer furnished medical insurance. And you are in a high cost of living state.

    If you still want to do this venture, go work for the fellow part time. 30 hours per week on your good paying job, and 60 hours per week in the part time gig. That will start your training as a business owner, and give you a chance to learn the necessary fab skills without quitting a good job.

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  3. #22
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    Great responses to your post.

    I don't think being "unfulfilled" is a valid reason to make a drastic change. You need to work to provide for your family. Spending your time looking for fulfillment does not pay well. It may happen that you will find fulfillment working at Wal-Mart, but it is not going to support the family well. Perhaps going to school for that "Art Degree".

    There is however, working in a field that suits your personality and skills. Do you not fit in the financial field or do you just need to work somewhere else?

    There was a particular shop that I worked in and I thought that I don't want to be a machinist anymore. I left to work as a temporary Solidworks designer. When that ended I took another job that let me do some machining at home (since their shop was lousy). I realized I liked machining. It happened to be that I did not like the way the owner ran the shop that I had previously worked in.

    I only started my shop after being laid off. It was the next logical step since I had some side work already and I was able to get more equipment cheap.

    If you don't have the skills to be a lead fabricator, how do you identify someone who does? When I started, I thought my work was pretty good. I look at it now and think much less of it.

    Our jobs do take up a large part of our lives and do create much of our identity. However, I would rather find fulfillment in having done my best raising my kids and providing for my family. If I believe my job is not fulfilling, perhaps it is receiving a disproportionate amount of scrutiny or importance.

    Bill

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    The only time Iíve a successful small shop purchase was of a shop with a hot product that the owner was making almost as if it was just a hobby. The new owner with marketing skills tripled sales and cut his manufacturing cost almost in half in the first year! Go look for an opportunity like that.

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    Quote Originally Posted by Bill in PA View Post
    I don't think being "unfulfilled" is a valid reason to make a drastic change.
    Boy, I don't know about that. I've made drastic changes for more fickle reasons.

    I hope the OP isn't like me, mid 30s and never found anything that's actually fulfilling. Starting a business is an expensive way to end up right back where you started...

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    Quote Originally Posted by ewlsey View Post
    Boy, I don't know about that. I've made drastic changes for more fickle reasons.

    I hope the OP isn't like me, mid 30s and never found anything that's actually fulfilling. Starting a business is an expensive way to end up right back where you started...
    I usually cancel most of what I write on PM instead of posting. When I read it back it does not look helpful. Probably should have with this one too.

    Bill

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    Quote Originally Posted by Bill in PA View Post

    Our jobs do take up a large part of our lives and do create much of our identity. However, I would rather find fulfillment in having done my best raising my kids and providing for my family. If I believe my job is not fulfilling, perhaps it is receiving a disproportionate amount of scrutiny or importance.

    Bill
    Well said Bill.

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  11. #27
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    I cannot thank everyone enough. The replies were overwhelming and I don't know that I have time to get to every one in the next day or so and I just wanted to make a couple of general notes;

    I have been in a garage or shop since I was 6 years old. This is not something that is new too me. I can design, cut and weld (poorly) very basic things. I would never want to spend all of my time with fab work, which again, is why I would hire someone. How do I know what to look for? 3 references and I want to you make this widget right now. Get setup and go. See what their work looks like. That is how I would evaluate and hire. I do know what quality work looks like kart-1.jpg. This is NOT my work, but work from someone that I had searched out and hired, because I know what I wanted.

    I have a shop at home now that serves as the garage for our current race car. I don't want to start doing fab work. I want to run the business. I want to grow this to a business that does 100k per month. I can't do that from my shop at home, and I can't do that if I'm the one doing all the work.

    The equipment alone is worth the investment. He has approximatly 10k in inventory (steel, aluminum), large, good quality mill and lathe with all support tooling, vertical and horizontal saws, (3) chassis jigs, (4) good quality welding or work tables, (2) migs, (2) tigs, standing drill press, forklift, shock dyno, shear, break, racking, sander/grinder, cnc pipe bender, tons of small tooling (drills, grinders, air tools, impacts, etc). I would guess the value new would be around 150-200k and probably 75-100k in used/auction prices if you were to search it all out over time. I figure I am buying the equipment for the 100k or whatever is agreed upon (appraisal, business valuation, etc) and then I'm going to retain 50% of the customer base as time passes.

    The biggest thing you guys have hammered in, is that I would need to keep my current job for as long as possible while taking this on. I don't have a problem putting in more work if I'm enjoying what I'm doing and many of the hours for my current work could be spent at the new shop. I guess after 6 months or so, I'll probably be able to realize which way I'm moving forward. I guess if I lost 20k on all the equipment after quitting and selling, then I would be okay with that, because I would be able to move forward and look back without regret. Regret of thinking "I should have gone for that, it could have worked"

    Current owner is moving out of state to be with family. Yes he could come back but he was burned out and wanted to retire 10 years ago, he just wants to work on his own stuff now.

    Again, thanks to everyone for their replies. I will try to respond as time allows.

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  13. #28
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    The 60's and 70's were racing's best years. Other than a few big national events attendance is way down. Many tracks have closed in the last 15 years and very few new ones are opening. I don't see the trend reversing.

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    That picture, looks like or inspired by an Anderson Superkart chassis. Small market but I imagine only an example.

    But all said from the input it boils down to: Keep your day job for as long as you can.

    Best of luck.

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    Quote Originally Posted by converterking View Post
    The 60's and 70's were racing's best years. Other than a few big national events attendance is way down. Many tracks have closed in the last 15 years and very few new ones are opening. I don't see the trend reversing.
    Have you seen the growth in drifting? Certainly takes skill but not what I call racing! Making a chassis not work - that is not performance except in theatrical vocabulary.

    Apologies for drifting off subject..

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    So I started my business at 23 from scratch and I'm 35 now. I have a lot of machinery now, but I started with a credit card and a truck.

    Here is what I say with the experience I have gained.

    1) your buying a business that is in 1 part of 1 industry, unless that is in aerospace or the auto industry, 1 part means little.

    2) your paying $100,000 for a business that is in 1 part of 1 industry, what's the difference between having $100,000 in the bank and starting off with new marketing, with a new business, in any industry VS having $0 in the bank and relying on someone who will be out in 12 months, who is already paid, and who doesn't care how the business is in 12 months.

    3) you have to move in 12 months anyways

    4) the business your buying has no reputation, so what's the difference between a little reputation for $100k or no reputation for $0

    5) how do you know the 100k is going to buy the machinery you need anyways. Can you spend 75k to get what you NEED instead of a lot of existing. That leaves 25k for a building, marketing etc



    Sent from my 2PS64 using Tapatalk

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  18. #32
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    Cant offer much here but those existing customers might walk which has already been said. But all those "new" customers might just be the ones you don't want. ie no , slow pay or just a pure pain in the butt. Everyone I work for has been threw someone I already do work for and have had no problems at all.
    I work every afternoon and all weekend building my side work up. Mainly because I like the equipment I work on versus my day job. Also because I think my time is limited here since the new company would rather rent than buy among other things. I just keep them for the benefits. Have you checked on health insurance if your not getting through your wife. That is what set me back a few weeks ago. Cant even get it for an individual around here.
    Everyday I just wait for the end of the day just to do some more on my terms.

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    More great replies, thanks.

    Yes the picture was just an example. That is not a market I want to get into. We can get insurance through my wife's work. Again, you guys have hammered home that I need to keep the current job if I want to take this on. Next decision is do I want to buy the existing shop or do it from scratch on my own. Thanks to all again.

  20. #34
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    I think someone earlier mentioned working for the guy in the shop. I think that would be a good idea for maybe a month or so to test the waters so to speak. This way you should have some contact with the customers and get an idea of shops capabilities/shortcomings. This will also test your ability to work 30 hrs at the day job and then more time on this job. I would also value the equipment in there at auction prices unless it is almost new or in high demand. Good luck either way

  21. #35
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    Quote Originally Posted by jamscal View Post
    I'd like to see the equipment list. Or give us a general idea of what he has.

    _____

    I'm real negative on custom automotive/ race car businesses.

    I see many of them ran or financed by retirees or rich guys who made their money elsewhere.

    Some are owned by people 'living the dream' and don't much care for business-like returns.

    Others have 'bought themselves a job'

    (Many others come and go).
    Agreed, without the equipment list, we have no clue how good a deal this might be, or not. $100K is NOTHING when it comes to starting a business, unless you are getting a $200K value in hard assets, then, it may be a great deal. People are spending $500K for a NOTHING house, and seem to think that is normal behavior nowadays.

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    Hey OP....go for it............................. Not my money on the line to tell you that.......................

    But I personally wouldn't.......................not with the scenario you present. I'd run the other way. I'd start from scratch. Buy equipment that I need/want as I go. Start out in my own place too. And if I really wanted to buy this guy out...............whatever number he values the place at, I'd offer and pay no more than half his asking price. Job shops, whether fab or machine are not worth all that much. And always worth less than the owners thinks.............................even with those "long time loyal customers"..........................

    Oh...........and good luck hiring a guy to run the place...........search PM on the subject of hiring good help. It's a huge battle for everyone in metal working....................

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  24. #37
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    Quote Originally Posted by F1wannabee View Post
    1 - He is currently doing ZERO marketing. No website, no listings, no referral programs in place, etc. All his customers are long time repeats or word of mouth referrals. By adding in a nice website and hitting targeted online marketing, I think revenues could be brought up by around 25% pretty easily and in a short amount of time. The only possible downside is we may not be able to initially handle the increased workload.

    ...

    I currently work 30 hours a week, have pretty much total control over my schedule and make good money with benefits.
    Why donít you offer to try doing some sales / marketing for a few months. Seems like you might have the time and skill to do that quite easily. No pay except commission- so current owner has nothing to lose... That will also help you understand if you will be able to sustain / grow the business as you anticipate. You might even make enough in commission to save up and buy the business...

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  26. #38
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    One thing to consider that should weigh in on buying vs building from scratch is the amount of money and time put into the actual shop building and getting everything online. I bought an old grocery store, it was cheap at $4/sq ft and had 3 phase power, HVAC and lights. That was really it. I have had to run every bit of electrical, air, dust collection etc etc. I am still not done. I don't want to nor can afford to pay a contractor to come in and do it for me. Not a huge deal, but something to keep in mind, especially when a friend bought an existing building from one of his customers with everything in place. He literally just had to bring his cnc machines in and plug them in to already existing support and supply structure. They even left air compressors, vac pumps, the works. He only spent 2 days moving all his stuff and was running the routers at the end of that 2nd day. He lucked into a sweet deal, but it makes me sick thinking of all the stuff I still have to do that he just walked into for app $8/sq ft. To be fair, it is a huge facility and he still had to pay a big number, but he didn't have to really stop business to get it done.

    Even with that said I do think the scenario you have laid out would be one I'd let go. I'd start from scratch and build it up the way your business needs vs what his did. I'll admit, if I had thought I would be doing what I am mostly doing now, I'd wouldn't have bought some of the stuff I did and bought different machines instead.

    The main thing you have to get on top of is that if you aren't going to do the fab work yourself, then you have to get enough work to pay the employee immediately and all the rest of the overhead. Even if you are slow you have to pay that which means you eat up your savings and don't eat yourself. If I had to make a payroll every week, I'd have quit a long time ago. I can work around an unknown paycheck for myself, but I don't think I'd handle it well with an employee.

    How long do you think it would take to break even and then how long before you make a profit with an employee or two? You have that much saved up? Like the other guy said, if this guy doesn't have a reputation then I'd go buy the used equipment myself and put it on my place not his.

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    My business is in kind of a similar situation: small gross because I want it that way, so I don't advertise or have a website anymore. I have more equipment than necessary, but 2 more guys could easily be added, as there is enough equipment for that (repair shop/job shop).

    I figure a prospective buyer should have enough gumption to be able to drum up more work than I currently have, rather than me having to do that, add employees to handle the extra work, grease all the wheels and then hand the thing over on a silver platter. But, I'm not holding my breath for such a person to ever come along. Doesn't matter anymore, I work for something to do. Since I quit growing my business, I clear 90k per year, not boasting, just saying a buyer could pay himself a lot less for a few years until he gets on his own feet. So not all 1 man shows are a losing proposition, but you still have to expect to work hard to succeed.

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    As others said...
    1.
    the value of 200k in machines+ materials ==30-60k.

    2.
    The ongoing work /client base actually has great value !
    4-5 clients / 100k margin, under 20-40 units/year trending much less..
    all work doable by one guy..

    A client like that, costs 20k$ or more to acquire, and such clients cost 3-10x more per client in great volume (to buy a big specialty fitter / maker with 200+ clients).

    But weather or not You yourself in fact are able to successfully monetize the clients is a big unknown.
    THAT is the Very Hard part - with n curveballs.

    *Profitability*,
    and *cashflow*,
    and *financing*,
    *while* maintaining ops and growing.

    2.1
    JUST having repeat work of say 6-8k$/month in gross margin can/will allow a new operator like you to not lose most/all of the 3-8k //month most new shops lose until gaining ongoing cashflow.

    3.
    CASHFLOW is actually more important than profitability, for a newbie, in a capital intensive usually late-paying business like most machining work is.

    Lack of cashflow from zero means you will typically be 200k in the hole after 12 months, while perhaps upto-date on payments and a nominal 20-30 k profit on 100-150k$ in work billed.

    And the finance charges will eat up half (or more) of your profit as a 150k$/yr newbie.
    Half of your margin.
    Because others buy material at -3% on immediate pay discounts, and have a 2M$ credit line at the bank to cover it at 2%+libor.
    And at 30 days net, vs -3% you pay effective 12 x 3% - not !!
    but 12 x 3% compounding == 200% per year cost on material.
    (Rems change it, but ..).


    4.
    Your expectations on sales/marketing are totally wrong re:web-stuff.
    You can certainly drum up sales but it will 99.xx% likely have near-zero to do with anything on the web.

    If You or your rep. does large numbers of personal sales calls to potential clients, you can get new business.
    A small part of it may be good business, typically 1/10 of new clients.

    It is not very hard ..
    but it is quite laborious, and requires great persistence in salesmanship.
    This is very expensive for this type of clients of repeat work, high margin, low volumes.



    4.1
    EVERY new client is a loss in cash terms.
    It costs more to get a new client, at first, than your immediate cashflow is or will be from that client.

    My opinion.
    I would theoretically pay the 100k for the goodwill and clients - on *results only* at end of 12 months.
    It would be an excellent deal, for me (and the seller).

    I would try to make the deal so the seller helps transfer clients to my new location, and each new contract counts for the payment due in proportion, after the client has paid their second bill or so.

    And while the seller shows/trains me on working/making what is needed for each client transferred, with a helper I contract if needed, to make sure work is ongoing.
    Thus the seller would be training me/my fab guy while getting the existing repeat work re-located to my location along with the machines, over the transfer period.

    At the same time each successful client transfer to the buyer augments the "guaranteed bank" for the seller.
    Written agreements, open books, both sides see real invoices and costs etc.
    As a buyer I would sign a certificate on each successful client transfer;
    order-work-delivery-invoice-payment (- invoices not paid by all clients) all documented in writing.
    Simple tickets are enough, especially if later countersigned by the seller of the jobshop.

    It might also be clever to have bonus payments of perhaps 20% + 15% (10-5% ?) for year 2 and year 3 to the original seller on ongoing invoicing from these "old clients" - subject perhaps to some advice and consulting by telephone if issues with the clients come up.

    If an old-time jobshop owner genuinely wants to help transfer clients to you - as it seems -
    this is quite easy to do when real goodwill exists on both sides.

    The seller would get 100k from You vs perhaps 30k he might get otherwise- or less- in a single transaction.

    -
    E.g. 20k in raw material stock is only 3-4k$ semi-scrap when it does not come from the original metal merchant, labelled, delivered, invoiced, traceable, etc.
    -
    E.g.
    The jobshop seller cannot sell his saws, only, at a good price and still continue operations while selling gear.
    Without saws or jigs .. (or gear xxx) work production stops.


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