Buying A Custom Homebuilding/remodeling Business

dirt diggler

seeking advice ...

i've skimmed this ... and i might have missed this


but




what do you want to do???

seekingadvice

Where do I begin? that's all I'm asking....I've never run a company....I've never owned one, never thought of owning one...

seekingadvice

I'm flattered by the recognition...coming from the field there really isn't a larger compliment. What I want to do is find out if this is all bull**** or if maybe there's some sincerity. If it's bull**** I'll walk out of pride, but I can't just let this go, it's a big deal to me if not to those who reply to my post.

seekingadvice

It's been almost a year since my last post as seekingadvice...I frequent this site under a different user name. I've been reading (for a year) and I've learned tons! I've gotten to know some of the personalities here so after re-reading over the replies and with the knowledge I've gained here everything makes a lot more sense...Thanks CT!

I had a brief meeting today with a co-owner and was asked to sign a confidentiality agreement before recieving the companies terms. Drawn up by their attorney. One item of the Confid. Agreement was that after signing I was in essence promissing to stay with the company for two years. I only agreed if that item was void. I asked for a copy of the agreement, but I don't have it yet.

I'm posting as seekingadvice to keep within the guidelines of the agreement to keep my anonymity.

My next post will offer a basic outline of the proposal. I'm not certain it is such a good deal, so some input would be appreciated. Especially with repect to the questions I should be asking, myself, attorneys, accountants etc...

Brock

Uhhh, there selling a remodeling business????? What's to buy? Heartache? I heard it all now. I only hope the "loyal" clientel are 3 million dollars worth of loyal. lol Oh my god , I think I'll sell my company this month, and again in March. Lmfao!!!! Hey my brother has a laweyer business for sale if your interested.

Wow this is the first time I have ever actually been laughing out loud when writing the abreviation for laughing out loud. lol.

Please let us all know how it turns out.

silvertree

I hope this is a real deal for you, right now it sounds like you have the wherewithal to start your own company without buying this business. I worked for a "Big 500" company, I think thats a Qualified Remodeler Magazine term. I was their top salesman and was led to believe I would share in the profits. Then they hired a consultant (for you good consultants out there this guy was not one of you), he spun his web and within the year they were bust. I got out with them owing me a large amount of money so I took some of their customers and started my own business, that was 20 years ago. It wasn't until I made real money that I got into trouble. I'm doing well now, and the hard times are gone but going from employee to owner is a tough move.
Why not start your own business without the stress of keeping an ongoing concern working. The owners will take the trust and comfort level of clients with them, maybe not all clients, but businesses are built on relationships, and although you may be a great guy, your not the guys that started the company.
Good luck however you choose!

__________________
Vote for Pedro
Kitchen, bath, St Paul remodeling
Minneapolis Remodel Blog
203K Loan Consultant Minnesota

seekingadvice

The Value of company X is based upon the standard of up to 3 times gross profit is $1.2 mil. The purchasers aren't expected to be in a position to pay this amount in cash so using profits before and after transfer of stock will generate the bulk of purchase price.

Business is usual for the following 5 years which the buyers will learn necessary duties...The Buyers put down $10 G's upon signing and $3g for the remainder of the 5 years. In that time 10% of gross profit will be credited as contribution to the purchase. Sellers estimate $350,000. At the end of 5 years the purchasers pay the remaining $850,000 or a prime rate interest loan for the next 5 and the sellers keep security of company stock and assets.

During the 1st 5 years either party/parties may cancel the agreements if requirements are not met. Payments made(not including gross profit credits) will be returned to the purchaser.

Not so great after breaking it down...we'd be paying double in the second 5 years with a loan at prime rate. Let alone a slide in our market. Wouldn't it be better for the owners to take full profit for 5 years, they are now with no difference to my income. Leaving a more manageable debt for the purchasers.

Nothing is set in stone so far...we're encouraged to seek out professional advise. This is the first offer. Financial statements haven't been expressed so I'd like to know more....perhaps 10% profit in 5 years could excede estimations.

These figures are based on 6 employers interested and assuming we can decide on a structure that satisfies everyone

I'm very sceptical, but I also don't want to miss an opportunity!

Thanks in advance

Brock

Easy. Give them the 10G and start running it.. Don't make payments after that point. Not a single payment. It is almost expected these days that the buyer will default. They will have to spend a fortune to get you out.

seekingadvice

I'm happy to entertain... Laugh all you want, 'cause you have no idea and you wouldn't understand the work or clientel we're dealing with...

Tscarborough

Assets and goodwill. Anything else is moot unless the owners have developed proprietary business systems. I do not remodel, so I am not sure what the value of repeat business or word of mouth is, but I would suspect that it would follow the person (i.e. the current owner), not the business name without them.

__________________
It ain't Rocket Science unless you are building rockets.

Brock

Obviously not. Could you give us "up an comers" an idea of the type of clientel your dealing with? Oh, and the work your dealing with as well would be great if it's not too much trouble.

seekingadvice

I agree. one of my fears is that once new ownership becomes public, customers on the bubble may be more inclined to the competitor. All figures are based on tangible figures not market trends etc...given we have a decent rerputation now, but in the hands of the wrong manager we're screwed.

As I said, I had a brief meeting with the owner...And I've discussed this issue with atleast one other involved. The potential is there. The buy out has been offered to 6 of us and it comes down to who's gonna risk their ass for it or who's gonna bail. This is the reason I wouldn't promise to stay for 2 years....This isn't a decision very many folk have the opportunity to make. I'm sure it's easy for most, but I have a great deal of my life invested in this company and walking away is more difficult for me than it would seem at face value.

I've been taught that you have to take risks, and that if you don't take the opportunity when it's given you may not have that opportunity again. Is this deal complete bull or worth considering? I have my own perspective of the situation, but there's always someone from CT who nails it....That's why I'm asking.

Tin Cup

This seems like an opportunity for the owners the sell the company to an ESOP. wonder why they haven't looked into that, or have they ?

Tin Cup

Mike Finley

This whole scenario gives me a head and stomach ache! I hope when I'm ready to cash out I'm big enough for Lowes to right me a check.

NC-SC, GC

The company is worthless in my opinion, unless there is a long standing with many customers who are always bringing something in $$ wise, and in this type of business there is no guarantee of it, the reputation and name may get you some business but not enough to make any business worth $1m or more.
You can get your own name and hire some of the other 6 employee's, if each of you put $10k in to the new business you will have enough money to flood the area in advertising, feed off, if the reputation of the old company is excellent, the fact that you all worked for them, your not doing anything wrong and you wont have to make any payments to anyone other than the normal every day items.
You will regret it if you buy this company, it just make no business sense at all.

I have an excellent reputation, 95% of my work comes from direct referrals and repeat work, I gross $2M a year, I'll sell you my company all of my clients and transfer my licenses to your name, you can have all of the tools and equipment, my computer, I'll even give you my business cards.. Anything you want I will turn over, and I will manage the company for you for two years, pay me $750K plus $100k a year for two years if you want me to manage the company for you, I will sign a no compete for 2 years.

troym

Dude, you need to call Dave Ramsey.