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  1. #41
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    If you are any good at finance, be happy making your 500+ a year and do machining/racing as a hobby. Seriously, I wouldn't leave it except to buy a business with IP - something with a product line.

    if you do buy the business, the old saying is "its not what you pay, its how you pay". put zero value on goodwill except as an earnout etc. Get vendor financing with reps and warranties and rights of offset. Be careful to not pay twice - there is no value to the goodwill if the liquidation value of tangible assets is greater than valuation through a multiple of cash flow. Don't count anything the owner says, if he's pocketing cash and not pay tax he is crooked - if its not on the books, do not pay for it. Oh, and have 3x the cash reserve that you think need.

    You have to be cold and calculating and thorough when you buy a business, you don't get a redo and the other side really would rather have you holding the bag than them.

    Quote Originally Posted by F1wannabee View Post
    Hello All,

    First, I just wanted to say thank you. This forum has been a wealth of info and has been very helpful to me already.

    I currently have the opportunity to buy an existing fab shop. My father has know the owner for a very long time and I actually worked for him when I was 17 for awhile doing basic shop labor. The owner has a good reputation and is a terrific fabricator but not the best business person. They show around $100,000 in gross annual sales with maybe $40,000 showing as profit. In addition to that, the owner is pocketing 20-30k per year in cash jobs. The owner has agreed to say on in purely a designer/fabricator role for the next 12 months as the business transitions over to me. I do not have his skills and would hire another lead fabricator once the year passes. A few of my thoughts and concerns are listed below;

    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.

    2 - He is out of room at the shop. I want to put a shipping container on the side of the building and use that for material storage and equipment that is not frequently used in order to bring in some additional automated equipment and make the work flow a bit better.

    3 - Would like to convert over to solar power to get rid of long term electric bills.

    4 - The shop is currently on his home property. I would not be purchasing either building, but all of the shops equipment (the equipment alone is worth 100k+), customers and "goodwill". I would have to personally move as well to a location where I could have a large freestanding shop on my personal property. I don't think the business can support rental or lease payments for the building right now.

    5 - I'm 36 and have a lifelong background around motorsports and general fabrication. I have been in financial sales up until this point and find myself beyond unfulfilled. I hate not having total control over my current business and the work environment has changed over the past 2 years. I feel it's time to do my own thing. This seems like a solid opportunity to me, as I can purchase the business and all equipment for $100,000. I have revenue coming in from day 1 and have plenty of ideas to cut costs along with bringing in additional work (motorsports - current owner builds race car chassis, but has not expanded outside of 1 class. We have strong opportunity in the market to branch out to other forms of motorsports. In addition to that, I was thinking of remote welding/repair, free pickup and delivery of parts within a 25 mile radius, general expansion of commercial and retail jobs). I think we can reach this market by way of some pretty basic online marketing.

    6 - I do have help and support from family

    7 - The biggest item holding me back, is my financial responsibility to my family. I currently work 30 hours a week, have pretty much total control over my schedule and make good money with benefits. The problem is I'm at the point that I hate the job and don't want to pick up the phone. I think just going to another employer in a similar industry is going to land me in the same place, so one of the few options as this point is to go out and do my own thing.


    I value any and all input. If you have questions please ask. If you have feedback please give it. Thank you all again in advance!

  2. #42
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    F1:

    While I have let it known that I don't think that this deal has Gold or Platinum, or even a Silver rating, and pretty sure that whatever the rating is - that it can prolly be found in the tailings pond @ Summitville, but at the same time I'm not backing up some of the ridiculous numbers that some guys here are throwing around. I mean come on, how much of any 1 line item can anything be in a $100K gross business?

    These guys are gunna have you losing $150K the first year - not counting what you paid for the business...

    There's no roses here, but come on....


    If you want to stress how bad something is - over exaggerating it Shirley isn't going to make any of your comments hold any water at all.


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

    Think Snow Eh!
    Ox

  3. #43
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    Probably already mentioned but I wouldn't attach much value to material. Pretty sure most of us here have a few $1000's in material that has been sitting there 10+yrs and it'll still be sitting there when we quit for good. Any material that isn't very common and 100% sure to make parts "soon"(repeat work), is worth only scrap value as far as I'm concerned.

    And yeah, to bill in the 100k + takes the right kind of work(not little walk in crap), mostly when cranking handles like its 1950.

  4. #44
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    Aside from all the numbers, here's a different point of view.
    When I was starting out 39 years ago, every bit of advise and opinions I asked for, and also the ones I didn't, were about 98% negative. From business owners, and from folks that had no clue what being in business even was.

    Point being, if you're OK with the concept that this venture-adventure might fail, go for it. GO FOR IT.
    You'll never know if you don't give it a go. You might find yourself wondering and itching about it till you turn around someday and you're 60 years old and still wishing you did try it. If you try and fail, or decide to give up, at least you got it out of your system. Then go get a job again, buckle down, and be happy as an employee with a steady pay check. People do this very thing every day of every year.
    Businesses start up, or transfer, and boom or bust.
    Not the end of the world if it does not work out.

    Which is what I might try if I were you......
    Work for the owner as much and as long as you can, while keeping your day job. Get the feel of what it's like and maybe you'll get over the idea before you go full commitment as you are talking about doing.
    It might not be the reality you think it would be.

    All this and the only other thing would be, if there was something you weren't telling us, like maybe your Dad's a multi-millionaire retired trucking company owner and he'll be there to bail you out if things go south.....
    That would put a whole different paint job on things.

  5. Likes Ox, Fabworks, converterking, D KIRBY liked this post
  6. #45
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    Maybe this: First, do a search of this site for 'partner' or 'partnership'. Much has been said, very little of it was positive. Read it all, to gird your loins for step 2:

    Next, consider whether you should enter into an agreement where you 'buy in' to the existing business using your apparent sales and marketing skills, for a year or three, while keeping your existing job and finessing your schedule as needed. Identify the fertile markets (& products & services) get him on the web, develop brand identity and strategy, do trade shows/schmoozing/etc. You also have a say in production methods, with an eye toward efficiency (both time and money). He agrees in writing to execute as needed to meet the market's needs with high quality and decent profit. (Fraught with peril, I know.) You will be working more than 30 hours, but with the aim of building the business to a level where it can help sustain the eventual, and highly-contract-structured transition from him to you. Lawyers will be needed. Audits will, too. And it has a high crash-and-burn possibility. But what you would lose is credit/dollars for his increased business, and some time, but not your job and not all your money. At the end of the contract term, you have the right to buy the biz at pre-defined terms and pricing, and he has to sell. If you decide it's not for you, then you can walk away. It would be best not to give him that flexibility. It's pretty low-risk for him, as long as the new sales are properly targeted and vetted.

    This is a decidedly non-optimal approach, and if you ask if I was the one who suggested it, I'll deny it.

  7. #46
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    Hey, I fully "get" where you're at and support your ambitions. Sometimes though, ambitions can "blind" reality. Sorry if some of this is repeated, I don't have the time to read what everyone else wrote:

    1. The $40K is NOT profit, it's salary. "Profit" is what you make extra beyond a reasonable salary. Invest $100K for the long term, and you can expect 7% growth (while still earning more money than the $40K at another job).

    2. The solar and other stuff, rent, etc. will all have to be factored into your overhead and see what you get in return (including your salary). I seriously doubt that solar is your biggest opportunity.

    3. Not surprising he's pocketing cash without paying taxes. Heard on a podcast, "Who cheats on their taxes?: Anyone that knows how!".

    4. You'll have to do a market study, look at other shops, how many employees do they have?, sales, etc. There's no "magic wand" here, only the potential ability to get business that is maybe overflowing at other places or pull it in from geography that's far away at the moment. You can't really get "super rich" at a job shop unless you figure out how to beat everyone else at their own game and get a good business mind to grow something "huge" that you can sell some day. You have to start somewhere but you don't get there sticking with used equipment and focusing on expenses. You invest, invest, and then invest some more (likely taking out loans if you really want to grow). Decent earnings? Yes. Job satisfaction? Yes. Work your ass off? Likely. Potential for failure? Absolutely.

    Good luck, I wish you well!
    The Dude

  8. #47
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    Another thing to consider is product liability. If you have assets you will be at risk for a lawsuit. Insurance is unobtainable
    .

  9. #48
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    Quote Originally Posted by dkmc View Post
    Point being, if you're OK with the concept that this venture-adventure might fail, go for it. GO FOR IT.
    You'll never know if you don't give it a go. You might find yourself wondering and itching about it till you turn around someday and you're 60 years old and still wishing you did try it. If you try and fail, or decide to give up, at least you got it out of your system. Then go get a job again, buckle down, and be happy as an employee with a steady pay check. People do this very thing every day of every year.
    Businesses start up, or transfer, and boom or bust.
    Not the end of the world if it does not work out.

    dkmc's words remind me of a favorite quote of Teddy Roosevelt:

    “It is not the critic who counts;
    not the man who points out how the strong man stumbled or where the doer of deeds could have done them better.
    The credit belongs to the man who is actually in the arena,
    whose face is marred by dust and sweat and blood;
    who strives valiantly;
    who errs and comes short again and again;
    who knows great enthusiasms,
    the great devotions;
    who spends himself in a worthy cause;
    who at the best, knows in the end the triumph of high achievement,
    and who, at the worst, if he fails, at least fails while daring greatly
    so that his place shall never be with those timid souls who neither know victory nor defeat.”

  10. #49
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    Personally - ESPECIALLY IN FAB - I would prefer (good) used equipment!

    Give me good old, heavy, American iron any day over new, lightweight, import stuff!


    CNC tube benders and burn-out tables excluded...

    If you are looking at a good Pines bender, or a heavy Cinci brake or shear, or whatnot - as long as it has not been abused and sprung, that stuff there is the real deal! I would be very leary of used import stuff.


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

    Think Snow Eh!
    Ox


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