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Purchasing a business.

Discussion in 'General Chit-Chat' started by Stacy1203, Mar 30, 2019.

  1. Stacy1203

    Stacy1203 Member

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    Hey Guys! My husband and I have been in business for a year. We quit our corporate jobs waved bye bye to our comfortable 6 figures and have been running our sign, print and embroidery business. We like quantum leaps ( please save the advice about growing slow and blah blah blah we don’t believe in holding back for the sake of traditional thinking) anywho! We’re looking to purchase a business, one that really connected with us is owners we had spoken to when we first started out. They’re older and looking to retire so they want out! We began the initiatives for the acquisition but the numbers look pretty shady. My background is in exec level retail management and my husband in banking..... we know right off the back that money is being filtered out for personal use which then automatically decreases their cash flow but hey no big deal we understand business owners get a little slick sometimes. What I’m having a hard time understanding ( my accountant as well) is for the last two years the couple has put in paid in capital into the business. One year upwards of 50k and the next year upwards of 100k.. yet and still no one has been able to give me a straight answer as to why? After all expenses the business allegedly has a cash flow of a little over 40k so Its just not adding up. The gross income 2018 is around 350k which is 50k more than 2017 but the same as 2016. So my question is what would you pay for this? 350k gross, “40k cash flow” about 70k worth of equipment and inventory. This is company that turned a niche into a business, they’ve been around for 30years and only do embroidery. We see amazing opportunity here but just need to make sense of it all.
     
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  2. Gino

    Gino Premium Subscriber

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    If you, your husband or your accountant can't answer accounting questions, I would imagine, this business isn't a very good idea. You said yourself, you don't mess around, so why mess aroumd with something no one can figure out ?? Walk away and find someone else to buy...... or jist establish your own business and put some sweat into your future..
     
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  3. equippaint

    equippaint Very Active Member

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    Without having detailed financials, your cash flow number and any valuation derived from that is pretty much meaningless. Look at tax returns, owners salaries, depreciation etc to get a true number. There are different ways to valuate a business and your accountant should be able to give you a number. If they can not, you should consider shopping for another accountant before shopping for a business.
     
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  4. Stacy1203

    Stacy1203 Member

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    Work smarter not harder Gino! Trust me this always gets you better return! : ) My goal is to acquire businesses and build them in a smart way! I learned how easy this is from working in multi billion dollar corporations. My goal is billions not millions.. sweat alone will never take you there. Quite honestly sweat is what got these two into a position of having to hide taking a salary out through random office supply purchases. You’re right though everyone is puzzled but it’s something about this that speaks to my soul. I’m interested in hearing other opinions from risk takers gives me an angle of different perspectives.
     
  5. Stacy1203

    Stacy1203 Member

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    Hahaha hey! Easy on the accountant! He’s a very sweet man he just likes giving the benefit of the doubt and not jump to conclusions. He actual advised me to offer 100k for the whole thing and assured “they ain’t gonna like it but it is what it is” hahaha terrible it’s me that’s putting my personal feelings into it (not good) I feel so sad that at 75 years old they’ve worked so hard ( not smart ) and their sweat equity isn’t really giving them a return. I’m interested to see what other folks are thinking may stimulate a new thought. They initially asked for 450k which I’m not even willing to pay half of that but at the same time we’re financially blessed so I don’t want to leave them out high and dry : ( So in a perfect world with these numbers just want to see what someone would pay.
     
  6. Stacy1203

    Stacy1203 Member

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    Oh and the owners don’t take an actual salary! But looking at all they things they pay for through the business it’s looking like they kinda do just through odd purchases
     
  7. equippaint

    equippaint Very Active Member

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    I'm a risk taker and my perspective is that you are very naïve and have a funny feeling that you were far removed from any acquisitions at the companies you worked for. You don't seem to have a good grasp on reality and think that throwing money at things is the smart way to work and grow. Rest assured, what you think is a large sum of money is not and will very quickly fly out the window when your eyes are bigger than your stomach.
    Now back to your valuation, why would you even offer 100k? If they take no salary then @40k it's a big loser. Now go an evaluate why it's a loser and chances are that you will find that these sort of "niche" markets are so constrained that there is little to nothing you can do to increase your margins. They probably lived off of a modest amount of money and enjoyed what they did but you are criticizing them and blaming it on them working too hard. You don't even understand their financials but you think that you can smarten it up. It's an asset sale pure and simple. At this point the assets are not producing enough to be a viable business.
     
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  8. TimToad

    TimToad Very Active Member

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    "Speaks to your soul"?

    Acquire mom and pop sign and embroidery shops and turn them into a billion dollar business?

    I'm sorry, but your entire vibe comes off very plastic almost to the point of my thinking this is some kind of trolling exercise. There isn't room in our industry for more get rich quick schemes and another FASTsigns, SIGNWORLD or SignsNow franchise type business model.

    Do either you or your husband have any graphic design or creative talent or experience?

    You'll soon find that without any of it, you'll be paying others do the single most IMPORTANT task of any creative endeavor. If you skimp on that part of it, you'll fail. It's that simple.

    Are you comfortable pursuing a business that may be committing tax fraud?

    How does that jive with your business ethics, expertise and that of your accountant?
     
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  9. Stacy1203

    Stacy1203 Member

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    You’re mean. That’s sad. In under a year in business we’ve grossed 150k. So I think we’re doing ok with zero prior experience may I add. We provide great opportunities for individuals with those skill sets that’s what it’s about creating more opportunities for people, not just making money. You’ll soon find out with such a nasty atttude you’ll be the next sad business owner making it to the end realizing it wasn’t worth it. :)
     
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  10. Stacy1203

    Stacy1203 Member

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    I neglected to mention that apart of what attracts me to them is they have pretty good connections with major organizations. Problem is they only offer one type of service which I believe going in and adding all our equipment and services could really boost some things up. I won’t even address you on your rude comments because being a new member here I thought this platform would consist of cool folks open to having conversations. So far its just been sad people with terrible attitudes. When you’re blessed don’t be afraid to bless someone else even if logically they may not deserve it.
     
  11. Stacy1203

    Stacy1203 Member

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    You know what’s funny... as nasty as you are! “It’s an asset sale pure and simple” is the line I agreed with. No matter how rude you guys are I will always pick out the sense from the nonsense in your answers. Please do keep them coming.
     
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  12. Billct2

    Billct2 Major Contributor

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    Who gave you the value of 70K for the equipment? Instead of your accountant I would have a business broker or an accountant who does more of this type of work.
     
  13. Stacy1203

    Stacy1203 Member

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    Hey Bill! Yea we’re going to have a broker officially do the evaluation for the equipment. My accountant did the face value based on the current selling prices for the machines. They have pretty good machines and quite a bit of inventory. We’re just waiting for more detailed financials from their accountant so we can turn everything over at once.
     
  14. TimToad

    TimToad Very Active Member

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    Oh please......... Give us all a break. My "attude" is born of being in a craft for 40 years and seeing more than its fair share of get rich quick schemers come and go. You two gave up six figure incomes and you are financially blessed so you could come disrupt a craft whose best practitioners have decades and decades of experience, talent and skills that you think some kid can pick up in a few months. So you come here to brag about your business acumen but can't even see a loser business committing tax fraud and still expect any of us to take you seriously?

    I also had a successful B&B for 8 years until the AirBnB, VRBO, etc. hobbyists killed that industry thanks to lack of regulation, government and insurance oversight. Just like the taxi cab industry is seeing itself gutted by "entreprenuers" wanting to turn driving people from place to place to yet another get rich scheme while doing very little.

    Many of us weren't born under a cabbage patch in order to buy your schtick. Which frankly, comes off more like used car salesperson than seasoned corporate veterans.

    Many of us have seen and SURVIVED through all sorts of labor killing technical innovations, business consolidations, wholesalers playing both ends of the business supply chain, etc.

    Grossing something isn't the same as what you net or a sign of success or even competence. It doesn't even reveal what you had to invest to generate that $150k.
     
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  15. Stacy1203

    Stacy1203 Member

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    I’m sorry you had to go through that Tim but know that people like me are so greatful for your sacrifice. The Vets are totally responsible for the evolution that’s happening in the market and know that most of us millennials don’t take that for granted.If you have 40 years of experience you’re old enough to be my grandparent. Fortunately for us technology makes it mentally challenging but physically more feasible to attain our goals... it’s the way of the world, the trend of evolution. The craft isn’t being disrupted Tim it’s evolving and if you have children you’ll be passing the business off to this should excite you! The room for growth and opportunity these days are endless. It’s not a bad thing it’s the absolute opposite.
     
  16. Johnny Best

    Johnny Best Very Active Member

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    I go to the horse races all the time and if a women says a certain horse "speaks to her soul" I am putting money on that horse.
    You and your husband seem to have a good grasp on business, if you feel that way, go for it. Good luck in your goals.
    Don't be affected by the nasty attitudes, those are people who bet the wrong horses.
     
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  17. James Burke

    James Burke Being a grandpa is more fun than working

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    Have you considered investing in real estate, or some other high risk / high reward venture?

    Typically, people who gravitate toward a career or business in the visual and creative arts do so for just about every reason other than the money.

    Granted, a business has to be profitable, but dollar signs aren't the first thing I think of when I wake up.


    JB
     
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  18. Stacy1203

    Stacy1203 Member

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    Johnny! You’re a breath a fresh air! : ) my gut hasn’t steered me wrong yet! Thanks Pal! :) all the blessings and success to you my friend!
     
  19. Stacy1203

    Stacy1203 Member

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    Hey James! Yes we totally have considered this! I think the only thing was we literally had no true desire and haven’t taken the time to understand the market. We got into this business because my husband has a clothing line that started as hobby and turned into something that required more time. It was a passion thing! We’re totally open to learning about other avenues of investments.
     
  20. WildWestDesigns

    WildWestDesigns Major Contributor

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    Something doesn't seem kosher here. If examining the financials leaves y'all confused on where money is going, then that business isn't being open (especially if they are trying to sell). That alone would steer me away from the business (and my business is very focused in the same thing that this business for sale is/was. While I'm only at 24 yrs in this trade and they are at 30, but I digress), because if they aren't being open here, where else are they not being open about?

    I do like to mitigate my risks, I may take risks, but I like to do educated risk management.

    I've got to ask what has been done as far as a C/B outlook on this purchase, how long would it would be for ROI.

    I've got to tell you, customers may not go with the new purchaser. While you may like those connections that the business has, it may not translate to those being your connections now. If your lucky, you may get one order out of them and hopefully they won't notice any changes with the product output that they will stick with you, but there is still no promises on that unless they are contractually obligated in some manner. Sometimes, at least at one time, what keeps people doing business with a business is the person that they were dealing with. Take them out of the equation, that hold isn't there anymore (granted that type of loyalty hasn't been in force for quite a while).

    I'm getting this "fly from the seat of my pants" vibe here. I can't put my finger on it, but that's the vibe that I'm getting. Not trying to be rude, just being honest.
     
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