The owner of the shop I work at wants me to buy the business from him.
It is a very good building, nice equipment and a good business. As it is now I am a one man show. The owner gets the jobs and runs the business and I do everything else. We do about $100,000.00/year.
My question is where do I get started with figuring this thing out. The owner is a great person and we have a very good relationship and I trust him but, I need to educate myself about the business end of the business.
Who do I go to for a second opinion; bank, account, lawyer? Are there any state (VT) or federal agency?
It seems like this sort of thing must happen all the time. Not just in wood shops but all sorts of business. ANy insight would be great. Thanks.
What does we do about $100,000/year mean? Hope it's not gross sales, because there is no way you can buy a business on the salary you are getting. Ask for the last 3 years of tax returns. Talk to his bank, talk to a lawyer. Look at other auction results for the machinery. Used woodworking machinery goes for pennies on the dollar these days.
Our shop rate is $85 per man hour - probably average for the Midwest. 1 man works 2,000 hrs per year, less 10% for whatever; 1800 hrs x $85.00 = $153,000 per year. In my work, the materials are about 1/3 of the total selling cost of the labor, and they are marked up 1/3. So, if we have $153,00 in labor, and then another $50,000 in materials, we gross about $200,000 in a year. If I work half time in the shop, then it easily gets over $300,000.
This makes for a payroll that is worth working for.
Offer him $500 to buy the equipment and start your own thing. Charge $85.00 per hour.
2 people & sales of $100k/yr doesn't compute! That's not a viable business. At best, that's just wages for the 2 of you! What about OH, Materials, Profit?
The bottom line is PROFIT, after you have paid everything else. The else includes all wages. Profit is the reason for business, w/o it you have a hobby. I have nothing against hobby woodworking, might even be more fun that WW as a business.
As one guy told me when I was starting out - "That's not a business, that's a job!"
You are getting piled on, for sure. But look around here on the Woodweb site (use the search) and look up business topics. I think we all have been where you are, if not close to it.
I think your boss is trying to sell you his job. But, it all depends upon how much he wants. With those revenue numbers, it really is just the value of the equipment at auction, as well as inventory, if there is any.
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