Looking for ideas on how to take over a business

[Barry Block]

Hi all,

So I have been in the furniture making business for a little over a year now. As many of you know it ain't easy. I have found that while I have spent 80% of my marketing and exp on my furniture business 80% of my income has come from Contracting and on site work. I have not even tried to build up that business, it has all come from friends and word of mouth.

I have recently been taken on as a sub working for a contractor who is currently doing work on his own property. He is 70 years old and is currently getting out of the business. He is only taking on small jobs to help offset his costs associated with the work he needs done on his properties. Over the last few years he was planning on his son taking over the business but his relationship went south and his son got a killer oppurtunity working for a large construction company so do to age and no longer having a family member to take over he has slowly been downsizing and focusing on getting his own stuff done while he still has 1 employee and the energy to complete the necissary work.

So here is the situation. His one employee sees how things are going and he has gotten a new job and giving notice tomorrow. So now his one employee is gone. He now needs help and for me to keep growing I need help. We both need a worker, he is getting out of a business and I am gearing up to start one.

Back ground on his business. He is known as one of the top tile, marble and plasterers in Philadelphia area. While those are his specialities he handles all aspects of a GC. While he is difficult his reputation is incredible and he caters to only high end clients with big budgets. I see the calls he gets and hear the conversations where he is pushing them away. He is one of the owners of the building I rent from so I know what he managed to build up over the years.

I don't have money to try and buy him out and I would need him to transition and mentor me for several years anyway. My question or the ideas I am looking for is how to pitch him to get him to trasition the business to me that would be finicially beificial for him as well as me.

Currently my thoughts are to get him to up my sub rate to include enough for an employee or two so he no longer has to deal with managing etc and I then have the funds to hire some guys with his work and what else I get in. Then to try and work out a percentage of business he brings in through calls where I would supply the man power and he would effectively act as a consultant on the job or GC. This would go on for 3 years with a strong transition at the end of year two. At the end of year 3 we evaluate the business and go from there. Thoughts?

[rudy de haas]

This sounds like you want to take the old man's reputation and business without doing the work to earn either one - and that just isn't going to happen. If, however, you really wanted to make something like this work and have the skills to deliver what the customers want, I'd suggest that you talk to him and his son about a partnership arrangement under which the son continues where he is for the duration but assumes a part time role as partner-in-charge of the business. That way the legacy continues, you get a chance to prove yourself without putting up a bunch of cash, and the old man has his son in a position to protect him and his reputation should that become necessary.

[Sean Tracey]

What exactly would you be buying?

The business is him and he's retiring.

[Barry Block]

This sounds like you want to take the old man's reputation and business without doing the work to earn either one - and that just isn't going to happen. If, however, you really wanted to make something like this work and have the skills to deliver what the customers want, I'd suggest that you talk to him and his son about a partnership arrangement under which the son continues where he is for the duration but assumes a part time role as partner-in-charge of the business. That way the legacy continues, you get a chance to prove yourself without putting up a bunch of cash, and the old man has his son in a position to protect him and his reputation should that become necessary.

To some extent you are correct. Why does anyone buy or take over a business if not for the brand, location or client list etc?? That would be the win in it for me. What I am trying to insure is that what I come up with to pitch him is also a win for him. I am not trying to take advantage of anyone here.

Thank you for your suggestion but prehaps you should reread my initial post. The son wants nothing to do with the business which is why he is essentially forced to fold up. I really do not need to prove myself? I would not even be thinking that this was possible if I a didn't have the skills or his respect. But again you are somewhat correct and why a three year transition would be necissary. He gets to still oversee the operation and maintain his reputation. If things go south we go our seperate ways with no real harm done. As far as his legacy is concerned currently he has none. Atleast this might be something. I have known him for a couple years as his tenant and we have become quite close. I am sure he would rather see his current clientele/ business go to me then some other guy.

[Barry Block]

What exactly would you be buying?
The business is him and he's retiring.


I don't think he really wants to retire. Not entirely anyway. His son bailing on him left him in a bad way and essentially left him in a postion where he would have to build up a whole new crew. Had I been working for him at that time I am sure we would have arranged something then but unfortunatley I am coming in a bit late.
The goal would be to find a solution where I handle a lot of the day to day operations. He focuses on clients and supervises when necessary. We build the business back up and in 3 years we evaluate the relationship. If the company is turning a profit and i am in the position to do so I buy him out. Currently he get nothing for his business other then what he can auction the tools and equipment for which isn't much.
Another reason why I don't think he wants to fully retire is he has atleast 200k in work to do in his rental properties and his home which I know he needs to offset with some income. I think his plan was to utilize his one employee and me occasionally to still bring in some cash. Now that his employee is leaving though it puts him in yet another tight spot.

[Sean Tracey]

A little better.

To build it back up with you working there during the build up and then buying it could be viable. But, you need a program where you deal with the customers and he teaches you how to operate the business. You want your customers to be yours. If the customers are his, then the business dies as the customers who were there for him leave.

He can introduce you to the customers and have you deal with them. He needs to be at the business and/or on-call to ask how things are done.

Step 1. Figure out how business works and don't change a thing that is working until you understand how all of it works together assuming it is mostly successful.
Step 2. Keep learning business and developing customer relationship.
Step 3. Once you have a handle on the current operation and customers, figure out improvements.

[Barry Block]

Good info. I was figuring I would let him run the clients for the first year or so and then slowly transition that role over to me as well. Completly agree that over the years I would need to become the face of the business so that when he leaves it would go relatively unnoticed.

The details which I am struggling with is how the structure could work in the interim while we are working togeather trying to build the business up. A Partnership? Does he still own and operate business and I am his employee(it might work but I have some concerns there)? I need to come up with something that while he owns the company he isn't responsible for everything. Not because I care so much but because I don't think he wants that much responsibility at this point.

[John T Barker]

I think a direct approach right to him might go well. He knows his years are limited and that he probably wants the business to go somewhere when he is no longer active. Lay your cards on the table, offer to be a junior partner and let him call the shots on how it happens. You both benefit. If there is not a way for you to completely take over the business in the near future he might think of a way that it can happen. If you are close to this man I would think he would appreciate an honest, direct approach, man to man.
Btw, I might be showing my ignorance here but of what value is a customer list? Aren't these people that already have his work and wouldn't have as much need for it in the future?

[George Werner]

A little better.



Step 1. Figure out how business works and don't change a thing that is working until you understand how all of it works together assuming it is mostly successful.
Step 2. Keep learning business and developing customer relationship.
Step 3. Once you have a handle on the current operation and customers, figure out improvements.

1000 times this, especially Step 1. It doesn't only apply to a woodworking business, but to every business. In the last couple years I witnessed a local bar and grill that was hugely successful take a massive dive when the new owners decided they could do it better. The new owners kept all of the staff, didn't change a thing on the menu, and left the decor the same for the first 3 or 4 months, business kept booming. Then they decided they could do it better and let go of all the wait staff, completely changed the menu and then changed the name of the bar. That once successful bar now closes regularly at 11PM on Saturday nights due to lack of clientele.

Moral of the story, there is always room for improvement in a business, just don't do it so quickly that it alienates the customer base that made the business successful in the first place.

[Robert Engel]

I would view it as an apprentice position.
An employee/assistant manager type arrangement with both parties agreeing to a buyout, a price and a date.

Like the others said, keep in mind many times the owner IS the business and it dies with them.

Stradivarius' two sons worked in their father's shop all their lives when he died they could not reproduce the violins and the business died.

Not discouraging, just saying you gotta be VERY careful and keep your options open. Give yourself a way out if things don't go as planned.

And talk to a CPA or financial advisor.

[Sean Tracey]

At this point, success or failure is equally dependent on both of you.

Important things to know right now:
1. You can only maximize your own behavior for success.
2. You have little or no control over his own behavior.
3. There are problems, described by you, right now.

The only way to protect yourself is to minimize your risk.

In order to buy a business, there most be something to buy.

He needs to build the business back up. You should be an employee, his right hand man.

If he desires to build the business back up for a sale, he will.

If he doesn't, he won't, but at least, you only lose work, not investment. Your time investment will likely be a minimal loss if you gain knowledge in exchange for that time.

Before making any agreements, see a business aquisition lawyer.

The key to success is that you both get what you want.

If either fails, you both do.

The best way to think of it is three entities. Buyer, Seller, Business. In order for both to get what they want, the most important thing is the business. It is the source of value for Buyer and Seller. Who has the most risk on that value depends how the sale is conducted. If you have cash or a loan, the risk is mostly on the buyer. If you make payments to the seller, then he shares in the risk as the business failing means he loses to.

None of this is fact. It's food for thought based on limited information.

Good luck to both of you.

[Peter Aeschliman]

Sounds like it's pretty simple at this stage: go to work for him as an apprentice, and make your intention clear to him that you want to learn the business and take it over when he wants to retire.

Learn the business, meet and impress his clients, prove your value to the clients, start telling the clients over a long period of time that the current owner is transitioning the business to you- give them lots of time to adjust to the idea, and then do it. Until you know the business inside and out including the financials and back office stuff, until you know whether the work makes you happy or miserable, and until you have a better sense for whether the clients will start calling you when he's gone, you have no business to value. So there's no point in talking money.

You've mentioned that he's kind of a difficult person to work with- you will figure out probably within 6 months of working for him whether you want to move forward with the plan or not. So definitely don't make any financial commitments yet. As you said, his alternatives are very limited at this point so there's no reason to commit to anything right now. Just gather info and experience!

Good luck!

[Ian Moone]

Wise old guy in the timber business once said to me.

Son - you know how to establish a successful small timber business?

I asked "how?".

He says "Start out with a huge one and just keep plugging away - you will get there eventually!" :D

Who knew? He was dead right!. :eek:

[rudy de haas]

TThe son wants nothing to do with the business which is why he is essentially forced to fold up. I really do not need to prove myself?.

Families are usually complicated. What I'm suggesting is a way for you to bring them back together - probably the thing they both want most but won't say they do. The proving yourself issue isn't so much a matter of your ability to do the work as it is of your ability to understand and cater to his needs.

[Barry Block]

Btw, I might be showing my ignorance here but of what value is a customer list? Aren't these people that already have his work and wouldn't have as much need for it in the future?[/QUOTE]

I wasn't necissarily reffering to contracting but repeat business is a contractors bread and butter. Everyone knows what is expected. They don't often do all the bathrooms at once, kitchen now bathroom later etc. Plus alot of the higher end customers renovate constantly, buy a new house etc.

[Mike Heidrick]

I think I am confused.

Barry what are you bringing to the table that is good for him again?

[Jim Andrew]

The main thing you can learn from a guy like you are writing about is his attitude, and how he talks to customers. People want to do business with the "best" contractor out there, and the easiest way to build that reputation is to speak of yourself as the "best". Your customers are not experts, and most don't know if they got the best job or not, as long as it is acceptable. Main thing once you have the job is do what you said you would, and get the job finished asap.