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Selling Shop/ Consultant Fee4/7
For the past twelve years I have been the sole employee in a custom wood shop. The owner is retiring. He offered to sell me the equipment and lease the shop but I declined. My responsibilities at the shop where, pricing, ordering, and manufacturing.
The owner has an interested buyer and they have approached me about consulting them. The potential buyer and I recognize the value of my experience with the building and equipment. The question I have is how do I put a number on my knowledge? I want to help them and see them succeed but also don't want to give twelve years of toil away for a song and a dance.
Thank you in advance for any insight,
Questions: 1) What is the buyer actually buying other than the equipment? Is there an ongoing source of orders that this person will be able to manage? A product line? Or just a rolodex? 2) Is the new owner in the business already, and this purchase adds volume to their existing operation, or are they hoping to take the place of your boss and run a similar operation? 3) Why are they offering you a consulting gig instead of continuing employment? 4) If you decide to be a consultant, are you ready to assume responsibility for your own taxes and benefits? 5) How much are you paid now? 6) Who else in your area would hire someone with your experience? What would they pay?
It's hard to offer much advice without more information, but if you can give us answers to those questions you will surely get some useful feedback.
Thanks again for responding,
Ross; I've been at this 36 years this June. My gut says this. If the purchaser already has a shop and this is an upgrade they need you for??? Nothing. Nothing except the image of someone all the existing customers know . They're not getting your clients?? They most certainly will. Where do you think they will go ? vanish? The new owner needs your face. Period. You already have another job at 27 /hr? so don't look back. Look ahead and move on.
Regards Harry DeVrieze
Does the new owner know your present responsibilities at the shop? Won't hurt to have a sit down with them so they can lay out what they expect and what they want you to do. Can't believe that your consulting time would be worth more than your current salary. You won't be bringing anything else to the table will you?
Sounds like you should stick with carpentry if you like it and your body can take it.
The value of the business decreases some amount based on what the new owner can't do without you.
At some point the value is don't buy the business or hire someone. Maybe he needs you for 3 months, maybe 6 months.
Your value affects the price, why not ask the new owner what he thinks that value should be and see if you are interested.
It will affect the final price one way or another.
If the new owner wants you as a consultant then you should receive consultant fees.
Any previous business owner should be charging between $50 and $100 per hour in consultant fees within the industry. Since you are not the previous owner your rate would need to be lower. I would suggest in the $35 to $50 per hour range.
The job of a consultant is to give advice and guidance to a business owner. The more experienced the owner the less advice and guidance they would need.
Given that the new owner is expanding and not starting from scratch so to speak they are probably already pretty strong in general woodworking knowledge. That would mean they want you for knowledge of the equipment or knowledge of the customers. My guess would be it is the customers unless a CNC is involved and you are the one that programmed and ran it.
If you have a strong relationship with existing customers then they are paying you to continue those relationships to counter act their not paying for the customer list. This has value to them and your time might be a solid investment for them.
So my suggestion is $35 to $50 per hour and stick to your guns.
This is a job that will end sooner the better job he does so to me $50 or a flat rate for 1-3 months with limits on time.
After Ross' second post, I have no idea what consultation is needed. He said the purchase was for real estate and machinery, no customers involved. So why would anyone need a consultant to buy a building full of machinery? Something doesn't make sense here with all the speculation.
B.H. and Alan,
Thanks for the responses. Like I said, this shop is a big step up in equipment. Maybe "consultant" is too strong of a word. I was going to show them where the grease zerks are on the cyclone separator (they are not easy to find), the fine tuning of wide belt sander, the best way change the knives on the planer and joiner...you get the picture.
Thanks again for your responses,
I guess then I'd look at it in terms of whether you are going to be a temporary employee on their payroll or an independent contractor.
If you are temporarily on their payroll then perhaps $25 to $30 per hour would be reasonable. If you are an independent contractor covering your own expenses (taxes etc.) then I'd say $35 to $40 per hour.
This is for machine knowledge only. The minute it turns into customer relations along with the machine training the price goes up to at least $50 per hour as an independent contractor. I wouldn't recommend being an employee in this scenario as it will likely turn into more involvement than you indicate you would like.
Sounds like they will only need you for a week or so, you should be able to show them what they need in a couple days, there is not much for equipment and most is fairly standard by the sounds of it?
I would agree with others, the information you have is worth at least $50 an hour, otherwise figure it out on their own. There is really nothing in it for you for very long.
Maybe it will be a recurring job, like every time the cyclone separator needs grease.