I Took The Gamble...

realpurty2

For those that read my previous post in reference to a possible business aquisition of a fellow GC. Tonight was the "big meeting" and pending a final meeting with the attorney's, here is what has transpired.

We did not buy him out... reason: You can't buy clients and his equipment wasn't of any benefit for the operations we are currently specializing it. It also would have meant alot more overhead with no real production gains.

We did not partner nor merge.. reason: Neither Ken or I want to merge a successful company with one that has known financial issues, employee issues, and poor management. I just couldn't see anything profitable for us out of a partnership or merger.

What we did do... K&R stays seperate and exactly as it is now. We assumed the current operations of the other GC's business with full control and final decision abilities. We will receive compensation at a salaried rate plus % of profit. A new bank account will be opened to keep the other GC from being able to dip into company account for personal use. He will draw a monthly salary and be utilized as a Superintendant and board member. It is the goal to keep two of his current employees that are of supervision quality and utilize them as foremen. New company policies will be implemented and enforced that will not tolerate the past behaviors of current employees. One chance to improve or else face immediate termination. Several more policies will be implemented over time, all geared toward turning around a sinking ship.

Basically, I'm going in, wipe the slate clean and start it over from the ground up. This is going to be the most stressful job situation I have ever encountered but one my gut tells me will be the best thing for everyone involved. The GC gets to keep his dignity intact and a comfortable income as a salaried employee, K&R will benefit by having more resources at our finger tips and more income once I get the other company back up to a profitable level, which should take 2 months or less.

I appreciate everyone's help when I initially laid all of this in your lap for advice. The decisions are made, just waiting on the attorney's to make it all legal to protect K&R and us personally from ANY liability in this venture. I'll keep you all posted as it all transpires.

Wish me luck.. this will either be heaven or hell, but I have to give it a shot. You only get a few chances at your brass ring in life...

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Woman in a Man's World.

Mike Finley

I wish you luck, I just hope this doesn't end up being you and Ken...



I'm still totally baffled at what the perception is of the value of devoting your resources on another business instead of reaping the rewards of focusing it on your existing one. But only you guys can make that decision. Good luck to you.

Patty

Good Luck Ken & Purty. Sounds like you have a bit of work cut out for you.

Mike brings up a very good point. Share with us your perspective of what you see "more resources at your fingertips" being.

I'm not grasping the concept either.

go dart

you must first have risk to have sucess, and you can be proud in the confidence you show in yourselves. celebrate!

Big Dave

Best wishes to ya. Hope it all works out as planned.

Dave.

__________________
Do one thing at a time, do it well, then move on.
http://www.bigdaveswoodworks.com

Grumpy

I don't believe that "you can't buy clients", if you have his phone number you have his clients.

I think you guys approached this in the best manner possible if you truly feel you can pull a profit, but heck why not? I mean you are running a very similiar profitable competing busines now? You have your systems in place, all you need to do is duplicate those systems.

Grumpy

I can't speak for their situation but I do intend to open up competing companies in my area. This goes against everything you just said, but the point is the new company will be geared towards a different type of client. Both companies will be competing with each other... but me being the share holders I get the profit from both.

What's the point you say? Well the more feelers you have out there the more chances you have to win jobs.

Will your first business suffer by focusing energies into the new company? Perhaps, and very likley in the early stages of the new company while you are setting up the foundation. However if you have SYSTEMS in place and good people who can work without your minute to minute leadership I don't see a problem at all.

Look at it this way, because this is how I look at it, Crew A calls with a question, Crew B needs you to order materials, Salesman A needs help pricing something, Crew B needs a <instert whatever machine name here> later in the day. What's the difference if Crew A works for K&R and Crew B works for the other GC? Heck they can lower operating expenses by sharing equipment and even sharing employees, subs and suppliers.

If this guy is operating as a superintendant (assuming managing operations) and they are doing the finance and administration, I don't really see a problem.

I say if it's profitable, do it! That rule applies to most issues we discuss.



Having said all that. If you are the owner operator "I do the sales, accounting and work on all the job sites." kinda guy, yeah you shouldn't have two seperate companies, it would be useless.

Ken@K&R

Ok the deal is we do mostly residential remodels and additions as K&R. We also do any residential or commercial electrical work. The other company does 90% commercial with only a high end bath or kitchen here or there. The way the new arrangment is we will take over the business. K&R keeps doing our thing but adds all the other companys residential work to our belt also. We then get to bid out the electrical to K&R and how convientiant accept the bid through the other company. All the while having access to 3 times the man power, heavy equipment, trailers, trucks, buildings, storage areas and whatever else we need. All this and we get paid a % of the profits. Unless I am missing something you guy's could help us see it seems like a win win deal. He wants to get out but keep the company and cash flowing in. We get access to employees,equipment and such without the monitary risks.

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Ken

AtlanticWBConst

Sounds like a win, win to me.
You are in a position to help because you have the resources and abilities that another company lacks. That lack, is what has held them back & caused their problems. They are a successful company, there is no doubt about that. This point alone makes it a win.
Your track record of business with K&B is the other win.
The plan you laid out sounds like it may be just what is required to keep a firm grip on the mistakes made previously.

When you can come into a company that is in trouble but has the proven income business..... that is a bonus, you already have the upper hand. In other words, the timing is just right. He needed you and now k&B is in a position to grow professionally by leaps and bounds.

-anyways,

My 2 cents and best of luck!

__________________
- Build Well -

Mike Finley

Why don't you do this today?

The answer to that question is the same reason for the point of my point of view on this situation with realpurty and Ken. You don't have to convince me whether expansion is good or bad, the question is only timing. I don't see any reason not to expand when the time is right, but everything I have read from realpurty is that they are swamped with work that they can't even handle now in K&R, they are having tremendous growing pains, they are having trouble with employees, basically the perception I have gotten is there couldn't be a worse time to take focus off K&R.

For example
http://www.contractortalk.com/f22/ranting-about-labor-10627/

If instead they were seasoned and had K&R running like a fine oiled machine then the situtation would be perfect for doing what is proposed. My concern is I just hope when it is all said and done they don't regret the timing. There is an opportunity cost to K&R in order for them to go through with this plan. Where would K&R be with the same devotion of time, energy, resources and money that will be going into this failed company?

I want to repeat, I don't wish to see you guys fail, I hope only for the best for you, no matter what happens.


PS - Grumpy, if your next company goes after a different client then it isn't a competing company.

PPS - I would focus on complimentary companies rather than competing companies, the synergy will be very profitable.

Grumpy

Mike I do agree if the timing isn't right the decison isn't right. From my perspective, why don't I do it today? The answer is simple and 2 sided really... A) I am still building my this business with it's systems and seeking the qualified help I can count on to operate without my day to day assistance. I have some good help but I need more. Therefore I wouldn't have the time to devoote without my current business suffering. B) It is cost prohibitive to do any massive expansion such as purchasing or starting a new company.

Mike I understand what you are saying, if it goes after a different clientelle it isn't a competing company and I agree. I should have said what I said differently and I would like to no rephrase. It will not go after a different demographic, but will go after the same demographic differently. My currently company does multiple trades, my next company will specialize solely on high end residential roofing like slate, tile and cedar... which are some of the services my current company offers.

I see what you say about the synergy and I agree... I've got lots of ideas. LOTS of ideas. I don't even want to throw all the ideas I have out there, but I see window treatments as a huge profit maker. Would I start another company or would I bundle this in house with my current company? I'd like to also start a retail garage building company which operates totally different from anything I have ever seen, and would incredibly reduce overhead also. So many details to work out, so little time. I'd also like to start a company that rents equipment and sells material, I see this being a huge boost to my current company because I can rent equipment I'm not using and buy material in bulk and sell of the surplus. My focus now is on my current company and though from time to time I will dabble on business plans, budgets and strategies for new companies as ideas pop into my head, they are totally on the back burner and won't come to life any time soon.

willbone3

GOOD LUCK

realpurty2

Mike, with all due respect, look at the date of the thread you referenced. That was nearly a month ago. If we let labor problems or lack of help go on for a solid month without correction, we'd be in the same shape as the other GC.

I know my post doesn't give all the details but it was getting long so it's paraphrased and highlighted. If there wasn't enough positive things for K&R out of this, it would never have been considered. Like Ken said in his post, we will gain shared resources, and more.

Grumpy hit the nail on the head, I intend to duplicate the already proven and working systems and make a go of it. I like a good challenge.

__________________
Woman in a Man's World.

Mike Finley

Glad to hear it, I can only go on what you have posted, if you have posted that everything is now roses you will have to excuse me for missing it. I will also congratulate you in solving all your issues in a month, that's certainly something to be comended.

Mike Finley

Grumpy,

follow this link, I wanted to take this conversation out of the public domain.

http://www.contractortalk.com/showth...837#post112837