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I have a friend that has worked for 30 years installing kitchens and baths for an owner that handles all design and project planning.
Just a couple of thoughts.
Jim, all great points...
C: He could have made all of his money through some other source that had nothing to do with his business. Maybe: investing, rental properties, inheritance, coupon-shopping, or any number of things.
Unless you see the financial books for this business, and have them audited by an independent professional, you are just guessing how much he might be profiting from this company. That's not a good way to evaluate a business.
Regarding your friend being the sole employee for 30 years does not mean that your friend knows how to run the business, or any business for that matter. Not to rain on your parade, but owning/operating a business, wearing all of the hats (finance, planning, marketing, sales, production, design, sourcing materials, etc., etc., etc.), and managing an employee is very much different than being an employee. I have been both. They are not the same.
You did not tell us if your friend's boss wants to retire and sell the business. Or, does your friend, after 30 years, want to start his own business in competition with his current boss. Either way, if you know nothing about the business this could be a challenge.
Your friends boss probably wants to get out for 2 reasons. First, he can afford to because he made good money when times were good. Times aren't good anymore, so he doesn't want to fight the battle anymore. Second, he can get a lot more by selling a turnkey business than selling off his assets.
There is only value in his business if he has either a brand (I doubt it), or a marketing and sales system which consistently brings in work irrespective of whether HE is there or not (this is possible, but I also doubt it). He IS the business, and when he leaves the value evaporates.
If I were in your position, I would go work for them for 6 months or so to get a feel for the operation. And if you do decide that you want to buy the place, don't offer more than what the assets are worth, because that's all there is.
I have read and re-read your posts. No where do I see where you mention that you would be buying out the current owner. Are the rest of us just jumping to conclusions? Is the business for sale? Or, does your friend want you to start a new business that will be in competition with his old boss?
What information are we missing here?
I also agree with Grant's first three paragraphs. Grant's last paragraph suggests that if you want to buy the company you should go work for the current owner. I think that this would normally be a good way to really learn the company, from the inside out. However, since the current business is only a two man operation, he may not want the expense of another employee on the payroll. You could offer to work for free, to evaluate the business, but there may be issues, such as insurance and liability, that the owner may not want.
Your friend may really want/need the security of continued employment. Set the friendship aside for a bit and consider this only from a business perspective. After all, if you buy a business and employ your friend, and the business goes under, your friend will find another job and you will be the financial loser. If you don't have the resources (deep pockets) to withstand that kind of loss, then you should probably pass. Your friend will find another job, and you can still be friends.
Do not mix friendship and business. It's just too hard, and it is often a recipe for losing a good friendship. I have found that being friendly with my employees is not the same as being their friend. There must be an owner-employee relationship for the business to work effectively.