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Take over a business?

Giogamesh

Plastic
Joined
Nov 3, 2019
Shop
So I’ve been thrown a big decision and I’m looking for advice and thoughts. First, let’s get this out of the way: I am both extremely fortunate and grateful to even be in this position. I’ve been asked about my interest in taking over my family’s shop.

My father owns a shop that has been in business for 30+ years. At this point there is no debt. All tooling, equipment and the building is owned. Got a handful of manual machines, a Cincinnati Sabre 1000 3-axis VMC (that I know inside and out) and an old Mori SL-10 that’s not currently operational but could be for pretty cheap. He’s getting close to being done, at 71 years old he’s had enough and is in a position to retire. He’s shopped the business for giggles, but nothing serious has come up. His best option would be to liquidate and take a few machines home to putter around with. Not sure what the terms of taking the business would look like as we only had a 5 minute chat about it so far.

I grew up in his shop. Spend Saturday’s there starting at about 12 years old just watching and sponging up information between doing homework on his desk and playing with the copier. Started working there at 16 pretty much full time until I finished school at 26. I went to school because if I wanted to be part of the business I was going to need a degree as a fall back in case thing went sideways. Another part of that was how the business absolutely broke him physically. He didn’t necessarily want that for his kids.

Today, I’ve been out with regular employment. 12 years as an Engineer at a large local, non competitive company. My employment is very stable and the company is mostly recession proof. We provide a vital service that nobody will go without, even if the economy is in the dumpster.

I still pop in after hours or on weekends when he needs a set of hands and I’m the CNC programmer and operator as he never had the time to learn the machine, so I’m still “in the game” a little bit. I like it enough that if I had the space, I’d probably have a bench lathe and mill at home just to mess around on.

Some of the negatives are that he put his eggs into just two baskets. It’s a job shop and he does repair and some new manufacturing for mining and process. There are two companies that make up 80% of his business. They seem to go in cycles and every 5-6 years, things slow to a crawl. He’s just coming out of one of those periods now and the customers are coming back strong, probably bolstered by the fact that they recently merged. They also want to move to just in time rather than on site spares. Given his work with long lead time materials (lots of 6AL-4V, duplex stainless, mostly net shape forgings or seamless pipe in those materials) this could cost the business lots of money on inventory.

I watched him through lean and rich times and there were periods when I was full time there that we all had to cut family member’s pay down to just enough to cover bills since it was so lean.

I’m really torn. I would love to get out of the rat race, but the steady check, benefits and stability are great. I also have time to spend with the kiddos, and based on my childhood, that’s less of an option when you run your own shop.

I’d also want to drum up new business and diversify, but with few contacts, I’m not sure how I’d start that up. I wouldn’t want to be in a position to depend on the whims of one or two customers. We’re also in the mountain west which seems to be slowing down when it comes to manufacturing, etc. our region is moving heavily towards tech.

Aaanyway thanks for letting me get that off my chest. Any thoughts out there?
 
My father started his business that was not machine or mechanical in nature while surviving the Dirty Thirties. In the 1970's he had a heart attack and had to call it quits. The business sold for 3K including boxes and containers but the warehouse he leased out for over twenty years. He often said that he had wished he had quit sooner and become a landlord.
I knew that I did not have the "killer instinct" so never entertained the thought of taking over. People who run their own business are different than the average person. they have to have that drive within and the ability to set feelings aside and be cold blooded. I am not saying to cheat on your competition but you choose your connections and take every chance you get. Unless you have that drive to work many many hours and make sacrifices I would suggest that your Dad find someone else to run the show.
The steel shop I retired out of found someone else interested in taking over the business while the partners retired and leased the building. It worked out well for both parties.
 
I'd seriously think about what it means to become some customer company's JIT slave. You can't manage that part time, and if you have guys to crack the whip over, you'll have to do that as well, unless you can find a kick ass manager.
 
I don’t know where you saw a complaint in there, and I opened with gratitude. There’s not necessarily going to be any handing for free either as it was an off hand comment and there has been no discussion of terms. It’s likely that there would be some sort of continued payroll situation for less and less work for pops as he winds down. I’m not taking anything for free or granted, and as I’ve mentioned in the original post, I’ve spent over a decade sweating side by side full time. If there was a decent outside offer on the business he’d sell and I’d be happy to see him do that, but as he’s put feelers out, his offers have been such low balls that he’d rather just sell equipment off and end up with more cash. He’s under no obligation to me, nor do I feel any entitlement to anything. This only came up due to an offhand comment he made when I was in earlier this week coding up for the mill.

The only reason I’m not there full time at present is that as a parenting decision way back when, it was “make your own way, then we’ll talk” and I have. As I worked down my path, things went well enough and the business slowed enough that it was better for my situation to stay on at my current employer.

The question essentially boils down to whether or not the industry can continue to support a two to four man job shop anymore or if disposable culture and the big boys are going to end up running those shops out of business. Can a small job shop even get in the door of a big Corp who wants to offload spares to their supply base, and pay on net 90 terms from the first of the month after invoicing is complete. Seems like the industry is also moving towards the supply base acting as a bank on top of warehousing goods on their behalf.
 
I'd seriously think about what it means to become some customer company's JIT slave. You can't manage that part time, and if you have guys to crack the whip over, you'll have to do that as well, unless you can find a kick ass manager.

Oh if this were to pan out it would not be part time. It’d be full time and then some. I’d be dropping my badge on my current boss’ desk...
 
Can a small job shop even get in the door of a big Corp who wants to offload spares to their supply base, and pay on net 90 terms from the first of the month after invoicing is complete. Seems like the industry is also moving towards the supply base acting as a bank on top of warehousing goods on their behalf.

I think you've answered your own question in your two posts - you want to spend good time with the family, and you see that there's changes in shop operations coming with the requirement of the customers to basically act as purchasing and storage for them.

While there's heartstrings at play here ('ol Pop's shop), I think your answer should be either to help find a buyer for your Dad's place, or with disposal of the assets.

Don't jump in unless you really think you can make the place fly.
 
It sounds like a good time to take it over to me, with the main customers just ramping up for a boom cycle. During that time of easy money try to diversify a little. Maybe even do 4 10 hr days if you need or want more time to be with family. Then if someone needs work on friday they can pay through the nose for it.
Also good for dad too, he can slowly ease out as he would probably go crazy sitting on the porch in a rocking chair. And still "young" enough to be active and involved in sales etc...

If he said this years ago:
"The only reason I’m not there full time at present is that as a parenting decision way back when, it was “make your own way, then we’ll talk” and I have."
And mentioned you taking it over now he must feel you are ready. He just put out a little feeler to see if "you" think you are ready. It seems like he wants you to take the initiative here. (If you want it)
 
Just some thoughts here, if the 2 main customers just merged, now you only have 1 main customer and if they want you to feed them only when they want it at your expense, then I'd be very leary of buying into that at all.

It has been said many times that with the internet and shipping it doesn't matter where you are, but I am not seeming to get anywhere with that myself, but I'd think the only long term solution would be to have regular work or a product that can be shipped so you aren't chained to the local industry.

I'd probably stay at the day job and have a life with your family. What is the upside to buying out your Dad? Is there hopes for more money? Hopes for passing on a business to your kids? Is it because you really like the work? The bad thing when you own the place is that it seems to turn into WORK, the passion and cool part of making/fixing things can easily be taken away by the running a business part and then it just seems to be a job without the benefits of a regular pay and hours.
 
he didn't have any decent offers on it because basically its value is him and the equipment, so he built himself a job, that has provided for his working lifetime. you already have that kind of job. stay there unless you want to switch for reasons that make sense. if you have health benefits at your currant job thats between 5 and 10 dollars an hour benefit make sure its what you want and not just what your dad wants. . I know I would not want to go into my dads trade for anything
 
Shop

I’m really torn. I would love to get out of the rat race, but the steady check, benefits and stability are great. I also have time to spend with the kiddos, and based on my childhood, that’s less of an option when you run your own shop.

Going from employee to employer is (almost always) the exact opposite of getting out of the rat race.

More rats, bigger rats, rats of your own to look after, everyone after the same piece of cheese.
 
I don't think you see many offspring of the original owner take over an existing business and thrive. Especially if the business is more or less some machines and a talented guy.

I bet when you really crunch the numbers you'll stay where you are and help your dad downsize his shop and lease out the building.
 
The best thing you have going for you is the company name. You have a great resume to show potential customers. It sounds like you actually know how to run the business as well so its not a "lets try this out" kind of thing.

I can tell you from personal experience that it takes tits toll out on family. I am always too busy to spend time with girlfriends and I dont really have emotions anymore from dealing with people on a B2B relationship. Cant be emotional when it comes to business decisions and its hard not to bring that home and into your personal life.

The upside is being successful from years of hard work and dedication is very rewarding. It can make you feel very accomplished and well respected. It gives you confidence in your decision making.

Running a business is not for everyone but it seems like you are in a good situation to better your life one way or another. If your kids are young and you have lots of bills it can be a harder decision to make.

Good luck either way you go!
 
I closed my shop of thirty years and took a job at 55......it was like a holiday,no customers standing over me ,no begging people to pay me money owed to make the weekly wages bill ,no pressure,and a good regular paycheck....and no lean periods or desperate underquoting to attract that elusive "good customer"............however,when I was young,I would have nothing else...its when you get old that running a shop is a drag.
 
Taking over/running a family machine shop takes a lot of discipline and sacrifice. My grandfather started an industrial supply and machine shop in 1945 and ran it up till 91 when my mother and myself took over. My fist experience in the shop was making keyed shafts for the industrial supplies inventory when I was about nine or ten during summer vacation and after school. Throughout the years as I progressed in the shop going day to day sniffing black cutting oil and getting smacked by birds nest all I could think of was "Someday this will be mine".

When that someday came around it was at the experience of my grandparents health running the business for so many years. I never really thought about it but one day I walked in to my mothers office while she was crying and she looked at me and said "Do you realize my parents never took a vacation in almost 50 years and I have not had one in almost 20"? With a small grin I just said don't worry, I'm on top of it.

I bought a few Cincinnati Sabre's, Arrows, and Hawks as well as some new manual machines that didn't have war surplus tags riveted to em and things were going good. I finally got a new truck and boat just didn't have time to use em. Here's where the discipline and sacrifice come in. Job shop work sucks, It will pay the bills since someone always has something broken. But, If you deal with those companies that run 24/7 then you had better be ready 24/7. That means, Don't think your'e going to go out and have a few beers with the guys and go home to the misses because you are always on call. For example Acme Industry calls you up at 2am and says "Hey Bob, We've got a line down because of a broken shaft. how quick can you get here"? You cant say "Sorry we're closed now but i'll be there in the morning". And you sure as hell cant go in smelling like a brewery! You have to suck it up, Kiss the wife bye and spend as much time as it takes to get them back up. And then what if it's something more complicated than your skill set? Say the shaft has a gear made on it, Do you have or know how to use a dividing head? can you grind a piece of HSS to cut a gear tooth in a fly cutter? If you don't deliver you may as well close their account (That may already be passed due by 30 days or more) and then prepare for them telling everybody else how you let them down.

You say you have a Sabre 1000 and a Mori Sl-10 that is currently down. Ok, you have a mill you know very well and I would venture to guess has an 850sx control? that's a 25 year+ machine that parts are almost impossible to find. Then the Mori, Well, It's down and needs some money to repair. If it's been down for more than a few days that means not a whole lot of work depends on it. I don't know much about your dads shop but just from experience I would say the manual stuff is probably older than the CNC?

Owning your own business is gratifying but as listed, It comes at a cost. And seems everyone else who has posted on this thread has some real good advise from "can you be a cold person" to "can you go without a paycheck for a few weeks or longer"? Can you walk out to the shop floor and tell a guy who is barely getting by when it's a few months till Christmas that you have to let them go because there is just not enough money make his salary? Better yet, can you do that just after Christmas when all the shops are typically slow and now his credit card bills are due?

From what I read in your initial post you seem to have a level head and a good career in front of you, I'm guessing you are in your early 30's? I get where you're at. Your dads shop for decades is at a crossroads of either let it go or do I take over and give it a whirl. This is something that will eat at you long after this post is forgotten. I've been there. I sold my family's 65+ year old company in 06-07 to Fastenal so I could open up a strictly production shop. I find myself quite often going on google earth and zooming in on the place and think to myself "Maybe if I tried a little longer". Then I look at my mother and my kids and want to kick the shit out of myself for putting them through that as long as I did.

Not a chance in hell would I ever consider another job shop even if the equipment was free.
 
Giogamesh: I think you've found the bear trap hidden in the woods.
When I read that your two main customers had just merged, and they now want *you* to take on the cost of storing their high value spares, all of my alarm bells went off, especially if they're paying at net 90.
Basically, they want you to front them the costs of their JIT spares, and pay interest for the privilege.
No. Especially not at net-90. That made my hair stand on end.

Maybe if you think you can use the current boom cycle to fund diversification into other markets before the next bust, maybe. But you'd better have one hell of a plan for doing that, and *stick to it*, even when they're hollering for JIT stuff *right now*. Otherwise, you'll just go under during the next bust.

It isn't the knowledge of the machines, it's the knowledge of where the hell the next job's coming from. That's the key.

I wish I had better news, but....
Brian
 
Are you a good engineer? Do the skills, training and experience you've accumulated as an engineer translate to running your dad's shop?

If it wasn't sitting there waiting to be taken over, would you ever want to start a machine shop? Surely you lived the life as a kid long enough to know the answer without having to think about it.

If not, it sounds like you have a good situation. The rat race gets worse, not better, because it's the same BS meetings and drama, but now you have to care.

I'd guess if you averaged it out against hours worked, across the good years and the lean years a typical owner of a machine shop like you describe makes less than a typical engineer.
 
A job shop is great when you are young,and was a source of great pride to me that I could do just about anything,and customers appreciated it....And the advantage you can work non your own projects too,race bikes and cars.After 10 years or so its a drag on your life...you are a slave to buildings, machines.employees and customers.Working all night to get jobs out begins to suck,especially when the customer drags out payment ,and then questions the price.
 








 
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