Business Opp


From original questioner:

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

From contributor Ji

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.

From contributor C

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?

From contributor Ch

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.

From contributor Gr

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.

From contributor Ch


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.