Looking To Buy Excavation Business

sutton82

I have minimal experience in the excavation business. I have the opportunity to buy a 30 yr. old excavation business. It is well established and stable with a good reputation. It does about 1 million gross a yr. and does mostly utility work and government work. There is one major operator that has 20 yrs experience and is fully licensed. Any tips? I am leaning towards no because of my lack of experience in the industry, but I am good at the business side. Apparently this is the opposite of most of your problems. How much profit is typical from this much gross?

dayexco

i have one question that comes to mind. let's say that you're carrying a performance/payment bond on a $500k job with an extremely tight time frame, big daily dollar liquidated damages if job isn't completed on time. this guy with 20 yrs experience gets ill, quits, or God forbid, die on you. do you have the comfort zone there to hire a super off the street to run your job without any knowledge of the business yourself? a poor super/crew can cost you many times over what profit potential there might be in the job in shoddy workmanship, redos. there are several pipe crew owners on this forum, and i'd venture to bet that if we pulled on each other's jobs, there would be many things we'd question as to why the hell they're doing it this way or that. will the owner stay on as a mentor for you to learn the grunt end of it until you get familiar with the goings on of underground work? trust me, it's a unique ballgame, and experience in the trade is priceless in dealing with problems that WILL arise.

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someday, i'll be as patient as Nick.

jmic

Personally I would never buy this type of business, I don't see any advantage for anyone to continue to use the company if the original owner is no longer there running the company. If you have to go out and create all your own relationships with his old customers you might as well just start your own company and mold the company the way you want to do business and what kind of business you want to be involved in. MPO.

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Joe

sutton82

Thanks for the replies. The owner would stay on as a mentor to help mainly with relationships, bidding, etc. But I am extremely skeptical. This is also a one crew company.

PipeGuy

Profit?

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

Duff

I wouldn't do it. If for know other reason that this is a business that people can get killed by poor judgement. As the owner (of a one operator business) you are ultimately responsible for the decisions that get made.

Anyone with capital can purchase the assets, however running those assets safely, effectively and efficiently seems to me to be a whole different ballgame. In a business as small as you're talking you have to be ready to step in and take over if one of Day's scenarios comes to be.

I've been preparing myself for a second career in this business. I purchased a piece of equipment and have slowly been learning (on my own property) and getting my licenses (operator, CDL). When I go it will be small and slow, hopefully learning all the way.

Since this operator is so key to your business have you thought about making him a partner and sharing some of the ownership with him? Giving him some equity seems to me to be a fair trade for all he brings to the business. Gives him an incentive too.

Good luck. Duff

dirtdiggencat

we have 4 principals, two of which have "minimal" dirt experience, well, one of them has seen dirt under his fingernails a time or two i would guess. lol ! he seldom comes to the sites, messes up his gucci shoes.
anyway, i wouldnt discourage you Sutton, just find the right team, give um an interest, do your job, "business", and stay away from your dirt guys so they can do theirs. sounds easy huh

rino1494

The more money you gross, the more headaches. Without having experience in the field, you could be in trouble.

My mom's friend took over her husbands excavation business. His father started it a long time ago and then he ran it and became a druggie so now she took it over. There 10 employees and they do gas/water work and paving. I have to give her credit, but she doesn't know much and is relying on her guys to run the business. She is holding on, but I don't think it will be much time till she closes up.

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dirt diggler

Frankly, I'd buy a Subway, or a McDonalds

and although the primary objective of a business is to make a profit ... I do not do it ONLY for that reason. I enjoy what I do --- thoroughly. And when there are bad days --- it is the desire that actually pulls me through

and it's funny cuz I'm slowly learning that my passion is perhaps both my greatest strength AND weakness ...



oh -- and contracting is risky (well, everything's risky I guess) --- but there are (disclaimer - my uneducated opinion) alot of variables on the wheel of fortune that do not not always land where you wished they would --- and ya still gotta deal with them.


and just because you gross $1000 on a job and gross profit %30 of that does not mean you'll gross profit %30 on every other job. It's predictable --- but UN predictable at the same time