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Selling a CNC Shop
Question
My difficulty is that I have some financial flexibility and I can offer rental discounts, owner financing, partnership opportunities, etc. but I have yet to find an effective medium to procure reliable woodworking entrepreneurs that may be interested in the payment flexibilities that I can offer. Any suggestions, or anyone that knows a competent woodworker that is an entrepreneur as well, please let me know. Forum Responses
From contributor B: Contributor T is right - without you, there isn't a business. What you have is used tools and blue sky. A business to sell is one that will operate without you. A savvy minded woodworker could set up shop across the street and purchase his own 100K worth of tools and save paying for air. From the original questioner: Your point is well taken. This company is different than a custom cabinet shop in that the business is primarily made of repeat business. Additionally, I am simply a manufacturer. The additional monies that I need for the company comes from an established and business-generating web presence, good name in the industry, and ongoing sales. There is value for a competent person who lacks $100,000 to purchase equipment, as I can transition them into the business. Putting this aside, any ideas for how to find buyers? From contributor J: I think you could find buyers easily enough, but the problem is going to be the price, which you have told us is $100,000, plus the goodwill which apparently is worth another $100,000. Convincing a buyer of that is going to be difficult. The $100,000 for the machinery... is that what you paid, or is it the resale value? From contributor G: You might talk to a business broker. You will need to prove cash flow over a three year period. Sales price is 2 to 2.5 times provable cash flow. I bought a 20 year old custom woodworking business five years ago, grew it 30%, and have it paid off in a few months. I was a hobbyist woodworker, but was a business executive. With the right person and a good transition plan, these businesses can be sold for way over equipment value. The equipment here could be replaced for less than $100,000 and I paid over $500,000 and have earned over $200,000 a year from the start. Good luck and spend some time concentrating on solid business principles that would make your sale a win-win for you and the buyer. From contributor J: Provable profit, yes, maybe, but not cash flow, unless that means something different than what I understand of cash flow. And of course, that value has to be based on the profit that remains after the cost of replacing the owner with a manager has been deducted. From contributor G: It is really utilizing both profit and cash flow. For example, I pay the previous owner $6000 a month, and if you take that plus a hundred other expenses that are for the owner's (my) benefit that disappear when I exit plus my salary, it will indicate positive cash flow for the value of the business. In 90% of the cases, the people looking to buy a business through a broker are looking to buy a job. They will replace the owner similar to what we did. My business makes very little net profit, but it is worth a bunch of money. Hey, to each their own. You can all sell your businesses for the used value of the equipment if you like. I am living proof that there are at least a few fools out there willing to risk good money for a chance to be their own boss. From contributor L: In my book a business that makes very little net profit is worth very little beyond the used tools. Fact remains that a small business has most of its profit potential in its owner. From contributor T: I agree with contributor L. If you sell the business to an inexperienced person, you will have to stay on to train them, and there is a good chance that won't be any easier than finding good employees. If that person has experience, why would he buy overpriced equipment? I hope you prove most of us wrong and get what you want. From contributor E: Be careful, one thing I noticed over the last 35 years is that cabinetmakers are artisans first and businessmen second, and more times than not, the two don't ever meet. I have seen people get burnt doing what you are considering. If the business is doing well, why not do as one post suggests and quit your day job? From contributor F: I believe that contributor G has the best advice as to the worth of your business. All had great comments - and all of them are true, at times. The difference is that a broker will do exactly what contributor B said - find you someone that wants a job. Prove that you are making money for yourself, and you may have a sale. My business has made little or no "profit" in 7 years, yet has helped me raise two kids and pay for 2 mortgages and several trucks/cars, braces, vacations, etc. According to my accountant it will continue to make very little profit... Understand? Could I sell my business? Probably not, as I am a consultancy and therefore the business really is me. I have very little equipment and a very special niche that I have carved out. I have another business I am in the process of building with three partners that will have equipment, real estate, etc. that we may someday sell - we are setting it up that way from the start. The point is that no one here is wrong in what they write - it's their experience that is speaking. That said, contributor G is the type of buyer you are looking for - a professional business person and a hobbyist woodworker! This is the person who can see the worth of it to themselves and buy what you are selling. Would you like to add information to this article? Interested in writing or submitting an article? Have a question about this article? Have you reviewed the related Knowledge Base areas below? 
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