I have a friend that has worked for 30 years installing kitchens and baths for an owner that handles all design and project planning.
He is the only employee besides the owner and the company is well known for doing high end work for high profile individuals i.e.: sports figures etc..
I have been asked by my friend if I was interested in getting into the business. I have never been employed in the industry but have means i.e: funds, time and computer skills.
I have more but lets see if you guys think its worth conversation
Just a couple of thoughts.
1. You will be working for the one guy who owns the company? How much longer is he going to be working?
2. If you are buying the business and the guy who has the company is quitting, you are only buying machinery as it sounds like he is the face of the business and people trust him. They don't know you.
3. You will be buying a job, not a business. Ask yourself if you want to pay that much to get a job.
Jim, all great points...
The fact is my friend has worked with him for 30 years and has been the sole employee. It seems that the owner has constructed a great business for himself, beautiful home, children in privates schools. I just can't believe all this with just my friend doing all the installs and other custom work.
Could he be making a lot off markups on supplies?
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.
The last 30 years were not created equal. A monkey with a hammer could have made money in this industry during the housing boom. The crash in 2008 weeded out the jokers. And it also brought profit margins down to razor thin levels for those who remain, particularly in residential cabinetry.
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.
FORUM GUIDELINES: Please review the guidelines below before posting at WOODWEB's Interactive Message Boards(return to top)
WOODWEB is a professional industrial woodworking site. Hobbyist and homeowner woodworking questions are inappropriate.
Messages should be kept reasonably short and on topic, relating to the focus of the forum. Responses should relate to the original question.
A valid email return address must be included with each message.
Advertising is inappropriate. The only exceptions are the Classified Ads Exchange, Machinery Exchange, Lumber Exchange, and Job Opportunities and Services Exchange. When posting listings in these areas, review the posting instructions carefully.
Subject lines may be edited for length and clarity.
"Cross posting" is not permitted. Choose the best forum for your question, and post your question at one forum only.
Messages requesting private responses will be removed - Forums are designed to provide information and assistance for all of our visitors. Private response requests are appropriate at WOODWEB's Exchanges and Job Opportunities and Services.
Messages that accuse businesses or individuals of alleged negative actions or behavior are inappropriate since WOODWEB is unable to verify or substantiate the claims.
Posts with the intent of soliciting answers to surveys are not appropriate. Contact WOODWEB for more information on initiating a survey.
Excessive forum participation by an individual upsets the balance of a healthy forum atmosphere. Individuals who excessively post responses containing marginal content will be considered repeat forum abusers.
Responses that initiate or support inappropriate and off-topic discussion of general politics detract from the professional woodworking focus of WOODWEB, and will be removed.
Participants are encouraged to use their real name when posting. Intentionally using another persons name is prohibited, and posts of this nature will be removed at WOODWEB's discretion.
Carefully review your message before clicking on the "Send Message" button - you will not be able to revise the message once it has been sent.
You will be notified of responses to the message(s) you posted via email. Be sure to enter your email address correctly.
WOODWEB's forums are a highly regarded resource for professional woodworkers. Messages and responses that are crafted in a professional and civil manner strengthen this resource. Messages that do not reflect a professional tone reduce the value of our forums.
Messages are inappropriate when their content: is deemed libelous in nature or is based on rumor, fails to meet basic standards of decorum, contains blatant advertising or inappropriate emphasis on self promotion (return to top).
Libel: Posts which defame an individual or organization, or employ a tone which can be viewed as malicious in nature. Words, pictures, or cartoons which expose a person or organization to public hatred, shame, disgrace, or ridicule, or induce an ill opinion of a person or organization, are libelous.
Improper Decorum: Posts which are profane, inciting, disrespectful or uncivil in tone, or maliciously worded. This also includes the venting of unsubstantiated opinions. Such messages do little to illuminate a given topic, and often have the opposite effect. Constructive criticism is acceptable (return to top).
Advertising: The purpose of WOODWEB Forums is to provide answers, not an advertising venue. Companies participating in a Forum discussion should provide specific answers to posted questions. WOODWEB suggests that businesses include an appropriately crafted signature in order to identify their company. A well meaning post that seems to be on-topic but contains a product reference may do your business more harm than good in the Forum environment. Forum users may perceive your references to specific products as unsolicited advertising (spam) and consciously avoid your web site or services. A well-crafted signature is an appropriate way to advertise your services that will not offend potential customers. Signatures should be limited to 4-6 lines, and may contain information that identifies the type of business you're in, your URL and email address (return to top).
Repeated Forum Abuse:
Forum participants who repeatedly fail to follow WOODWEB's Forum Guidelines may encounter difficulty when attempting to post messages.
There are often situations when the original message asks for opinions: "What is the best widget for my type of shop?". To a certain extent, the person posting the message is responsible for including specific questions within the message. An open ended question (like the one above) invites responses that may read as sales pitches. WOODWEB suggests that companies responding to such a question provide detailed and substantive replies rather than responses that read as a one-sided product promotion. It has been WOODWEB's experience that substantive responses are held in higher regard by our readers (return to top).
The staff of WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at WOODWEB's Message Boards. Participants should undertake the use of machinery, materials and methods discussed at WOODWEB's Message Boards after considerate evaluation, and at their own risk. WOODWEB reserves the right to delete any messages it deems inappropriate. (return to top)
Forum Posting Form Guidelines
The name you enter in this field will be the name that appears with your post or response (return to form).
Personal or business website links must point to the author's website. Inappropriate links will be removed without notice, and at WOODWEB's sole discretion. WOODWEB reserves the right to delete any messages with links it deems inappropriate. (return to form)
Your e-mail address will not be publicly viewable. Forum participants will be able to contact you using a contact link (included with your post) that is substituted for your actual address. You must include a valid email address in this field. (return to form)
Subject may be edited for length and clarity. Subject lines should provide an indication of the content of your post. (return to form)
Thread Related Link and Image Guidelines
Thread Related Links posted at WOODWEB's Forums and Exchanges should point to locations that provide supporting information for the topic being discussed in the current message thread. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related Link that directs visitors to an area with inappropriate content will be removed. WOODWEB reserves the right to delete any messages with links or images it deems inappropriate. (return to form)
Thread Related File Uploads
Thread Related Files posted at WOODWEB's Forums and Exchanges should provide supporting information for the topic being discussed in the current message thread. Video Files: acceptable video formats are: .MOV .AVI .WMV .MPEG .MPG .FLV .MP4 (Image Upload Tips) If you encounter any difficulty when uploading video files, E-mail WOODWEB for assistance. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related File that contains inappropriate content will be removed, and uploaded files that are not directly related to the message thread will be removed. WOODWEB reserves the right to delete any messages with links, files, or images it deems inappropriate. (return to form)
The editors, writers, and staff at WOODWEB try to promote safe practices.
What is safe for one woodworker under certain conditions may not be safe
for others in different circumstances. Readers should undertake the use
of materials and methods discussed at WOODWEB after considerate evaluation,
and at their own risk.