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Hey Business owners; I'm thinking about buying a turnkey...(long post)

Discussion in 'The Lounge' started by newyorkin, May 17, 2005.

  1. newyorkin

    newyorkin 1 ton status

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    Some background:
    A friend of mine has built and owned a small successful business in my field for 4 years. I've done some occasional contract work for him, too. It's a computer "Learning Center" that has morphed into mostly doing in-store and house-call repair work.


    He's now looking to sell it. Although they handled the bulk of it in the beginning together while he also held a full time job, his wife has been primarily running it the last two years or so. He used to say if I quit my job and worked for/with him, he'd quit his and really focus on promoting it. I was always too intimidated by the idea of 2 young kids and no health insurance, then, though.

    He's lost interest in it, and now got a very high paying job and doesn't want to spend any time on the store. They also have a 1.5 year old, and his wife really wants to go back to being a mommy full time again. With his new job, they can afford to give up the extra revenue of the store.



    He called me this morning and mentioned this while we were chatting, and I told him I was interested. I told him I've even been thinking about asking him to let me expand it under his name to another county, but I didn't want to say anything til I really thought about it and was actually ready to give up my full time job.


    So far, off the top of my head:

    The pros:
    -I will be my own boss
    -I've been looking for a turn key, high potential biz like this for about a year
    -The immediate/existing income is tight, but livable. But I haven't really gone over the books or thought about loan overhead, though.
    -It's been built from the ground up with a structure that can allow franchising in the future.
    -The business plan (manual) is already established and has been maintained
    -I'd be out of the city and be working 15 minutes' drive from home.
    -It can be easily expanded with promotion and wider services (business contracting)

    The cons:
    -Give up my cushy office job (and lose the stock options that still have some time on them...damn!)
    -No dental/health benefits (I'd have to buy personal insurance)
    -It may be very time consuming in the beginning
    -It would require full time dedication for *at least* the first few months
    -I would have to learn to deal directly with people off the street, you know, those consumer things
    -It would likely be a significant pay cut in the beginning, quick numbers in my head, probably about 35%
    -More wear and tear on the vehicle(s) (no more driving 3 miles a day to the train station)
    -Less time for CK5 :doah:

    This is a guy I've known and been pretty much best friends with for years. We worked together in radio years ago, and he got me the awesome job I have now, and before he knew I wanted to buy a business, he's been saying he's going to get me a job where he is now (double the pay, supposedly). I joke that my career is just network maintenance wherever he works.

    He's extremely reliable and does things "right"; he doesn't cut corners and he doesn't take risks, so I know the biz is on the up and up, everything is legal and everything is quality. He's also EXTREMELY smart with money, and very prudent in business and profession. I know he's not selling it because it doesn't have potential or because business is drying up, I trust him quite a bit on this, and he's looked out for me enough in the past that I know he would be straight with me if he thought this was a bad idea for me. He's barely entering the market, and talking to brokers, so it's unlikely he'll have to struggle to find buyers.

    He's avoided trying to sell services or contracts to businesses because he's been afraid it will grow too fast to support (one of the top reasons a small business fails in the first 5 years). He also only had me as a weekend part timer for the real nitty gritty computer work, like what a business would want a support contract for. His skills are 90% in web development.

    I was also thinking of asking another guy, Dave, to partner with me on it. I passed him a lead a couple years ago to the job he has now, where he's outlived two downsizing's and blown up through the ranks pretty fast to management, so he's got to at least know a little about what he's doing :rotfl:.
    This is a guy I'm not really terribly close to, but we are freinds and we both do the same type of work, we just never really have time to hang out (athough he got a boat we were talking about sharing the costs on, and I haven't done squat for it yet :blush: ).
    I think he's been looking for the same thing's I have, like his own business, and I knwo he wouldn't mind at all getting out of the city. Our wives are best friends, too.
    Dave and I probably both have the skill and the contacts to realistically support some business contracts, too, which would hopefully enable quick expansion of the biz to be able to support two owners.

    This would be pretty dramatic for me. Security (ie Job security) has always been a major factor for me since I got married. Risk is not something I like at all, but I've become more open to it in the last couple years as I see security isn't giving me much forward motion. I'm tempted to chat with my boss about this, he knows I've been looking into real estate opportunities to build retirement funding, so he would probably understand this while not wanting to lose me (ha ha, or maybe he wouldn't mind losing me and I just don't know it)...


    Some of you guys know my faith is an integral part of my life, and I usually dont think He's often that concerned with things like this for us (i.e. thank God for unanswered prayers), but this seems to land right in place with soooooo many things I've been looking for and thinking about, I almost feel like He's really arranged stuff to give me an opportunity.


    I've been reading a good bit, but probably not enough to be ready to step into this without some more serious studying. Then again, like my friend once said about having a baby, "When are you ever ready for these kinds of things?"



    So... I know we have some entrepenuers here, some managers, and in general some pretty smart people.
    Can anyone give me more *real* pros and cons of running their own business?

    In the end, this is something I know I'm going to be thinking hard and working out on my own, but the more input from anywhere, the better.
     
    Last edited: May 17, 2005
  2. divorced

    divorced 3/4 ton status

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    I can't offer any professional advice. You never mentioned if this type of work, and owning your own biz will make you happy? I would never have a job that makes me miserable, and I would gladly take a cut in pay to have a job that I am glad to go to. I make half the money now that I did at a previous job, but now have paid health insurance and I'm home every night (as opposed to being gone all week) and I couldn't be happier.
     
  3. newyorkin

    newyorkin 1 ton status

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    eh, debatable. Owning and operating my own biz would make me pretty happy, but I think having any kind of work that requires effort will always be a drag as long as my kids are growing up. :rotfl:


    Really, I would like to break free of working for someone else... And I wouldn't mind getting out of the city... Being able to make the decisions I think will excel business would be good, too.
    Master my own fortune I guess you could say, but I don't believe I'd have complete control over that no matter what I do in life.


    I think this is a good opportunity pretty much because it's closely related to a field I know pretty well already. I've always thought you should go into something you know if you're going to operate a business. That's why I've only been cursory looking at all these other opportunities I've been checking out (the restaraunt, the towing biz, etc).

    I know bagels pretty well, and I think that's another cash cow, but way dirtier and crappier hours, so I'm not exploring that road yet... :)


    His floor computers are probably due for upgrade now, too.
     
  4. MTMike

    MTMike 1/2 ton status

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    I know what you're going through - kind of :)

    In '01 I started a spare-time web design & computer repair business and had 2 clients. Since then I've moved to Billings and took the business with me. I've established an excellent paying job (especially for the area) right now that's very secure and has excellent benefits. The benefits are crucial as my wife is a cancer survivor and we need the best health coverage we can get. In that time as well, the business has grown and I'm on track to almost equal my full time job's income with ~15hrs/wk input to the business..... and just this past month I've acquired so much business I can't even keep up with it. I'm at the point now where I have to make the decision to turn business away or ask my boss if I can go part-time at my day job and keep my benefits (which is an option). I'm leaning towards the part-time thing but I'm not much of a risk-taker, especially with my wife in school. All I've wanted to do since dropping out of college in '99 was start my own business and become self employed.... I now have the makings for that and I'm almost too scared to do it.

    In your case, it's even more of a risk becuase you'd be losing that job security 100% where in my case it'd be 50%; and you have kids to worry about feeding, whereas I only have myself, my wife and our pets. And one other thing you need to take into consideration is the purchase price - how much is it going to set you back vs. starting yourself and building it over time?

    I would suggest that you get price quotes for self-insurance and then crunch numbers with your wife.... take into consideration also that in addition to health at your job, you have other benefits that you need to calculate into your numbers: such as 401(k), Stocks, Vision, Dental, etc, that all really add up to $ in your pocket. Also, your taxes auto-withdrawn so you don't have to worry about sending them in each quarter.

    My parents have been self employed now for about 3 years and the only cons I see in it from them and for myself would be: Income security, health benefits, and tax accuracy. Other than that I'm all for it.

    I wish you the best of luck man.... hard work always pays off in the long run.

    -Mike
     
  5. newyorkin

    newyorkin 1 ton status

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    Thanks for the input, Mike. That's right about it being 100% risk, giving up my job. I'm thinking maybe I can buy it and operate it like he did, while working full time for a while. That might be dangerous, though, so I'm wary of it.

    I'm visualizing plenty of hard work in the beginning, especially if I cut his two "full time" staffers to reduce costs and make the income livable from the start.

    I really think if the health insurance weren't an issue, I'd take the afternoon off to play with numbers and consult an accountant to make a faster decision. I know a guy that's opened and owns a couple businesses, one of them being accounting. I want to sit down with him to talk about this, but I doubt I can on short notice, especially with our drive to florida happening next week.

    The asking price he mentioned to me is unexpectedly low, I thought he was going to say 3x what he said. It's almost like the cost of a really nice car, I think if I could do it part time the first year and live off other income, I could pay for it with the first years income.

    My cousin is a business broker, I gave them his number and they have an appointment with him next week. He's pretty slick, so I have a feeling once he gets involved, it will be sold fast.
     
  6. MTMike

    MTMike 1/2 ton status

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    The price being low is also a major benefit to you.... Value-for-dollar-invested sounds excellent. One thing you may want to crunch as well is how may years will it take you to pay off the business loan by paying 100% of profit (before paying yourself but after operating expenses) back to the loan, and compare it to how long you want to be indebted for.

    It sounds like a pretty good opportunity, and i think that if you think about it carefully you will make the right decision :)

    Good luck.
     

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