Decking business advice

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Old 04-20-16, 08:12 PM
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Decking business advice

Hey everyone. I am new to the site and am looking for some guidance and outside opinion. I am not an expert in any means but I know quite a bit about woodworking and carpentry without ever doing it professionally. I have recently came into an opportunity to buy a small deck building business with a partner for $20-25k (10-12.5k each). This includes a 2012 van, tractor with posthole digger, laser, and about three of every carpentry tool you could imagine. I am not sure if this is a good idea or not but I feel the equipment alone is worth more than the asking price. What are some factors I need to look at before buying this business. Any and all advice is appreciated. Thanks!
 
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Old 04-20-16, 11:27 PM
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Why is the business for sale? It doesn't sound like you looked at the books yet. What are the profits, taxes, employee overhead, etc....? Does your potential partner know more about it than you?
 
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Old 04-21-16, 04:05 AM
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Welcome to the forums!
Buying a company's tools/inventory is one thing but when buying the business you need to know their customer base, reputation and whether or not that value will help pay you back.
 
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Old 04-21-16, 06:57 AM
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I thought of some more questions. What % of homes already have decks? Have licensing & permit laws changed recently?
 
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Old 04-21-16, 10:06 AM
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Also, why is the business being sold?
 
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Old 04-21-16, 10:39 AM
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The owner of the business is 84 and ready to get out of the business. I am not sure the percentage of homes in the inediate area do not have decks but our intention would be to expand advertisement into developing areas closer to the suburbs of Chicago. I am not away of any laws or permit requirements changing.
 
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Old 04-21-16, 01:50 PM
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84 yrs old sounds like a good time to retire
Now you need to determine if the value of the equipment covers most/all of the purchase price. While there is some value to an already established business, I wouldn't pay a premium for it.
 
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Old 04-21-16, 02:01 PM
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Just did a quick search on 2012 van and price and for a chevy work van was about 15000. no idea about the rest or type you wouls have.
 
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Old 04-21-16, 03:15 PM
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Personally, the red flag for me here is that it appears you would be a 50/50 partner with someone else. That can be a good thing but it can also be a horrible thing.
 
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Old 04-21-16, 03:49 PM
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IMO, you are buying a job not a business. The reason being that there is no way to predict future income based on prior income. That's if you even looked at the books.

Have you checked if there are any complaints with the Dept Of Consumer Affairs or the Better Business Bureau? You don't want to buy a bad name.
 
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Old 04-21-16, 04:48 PM
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Those are all some good points, I'll try to respond to all of them. Just doing a quick estimate of the amount of tools, the van, the laser, and the tractor I estimate the value of the equipment at 35-40k. It's an ungodly amount of tools. At one point he ran three different crews of four and supplied all the tools so he has a lot haha.

I also agree that it can be risky going into business with a partner. This person has worked for the owner for three years now and has owned a small business in the past. He has a lot of knowledge in the business. Overall I am not overly concerned with a partnership with him. We have both agreed to sit down and discuss a business model and plans before we make a decision.

As far as the books, taxes, consumer market, goes I don't have a lot of information on that. We are scheduled to sit down with the owner this weekend and discuss all of those types of things.

My thinking is that even if the business doesn't turn into what we expected, we have more value in the tools and equipment than we paid for it, making it a low risk high reward situation.
 
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Old 04-21-16, 04:52 PM
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I would advise passing on this offer. I'll repeat some of the other comments along with my concerns.
It is difficult enough to make a living in your own business, providing two substantial salaries will be next to impossible.

The business you describe doesn't have a strong client following, repeat business. You might get some referrals, but as you mentioned, advertising will be required. So why pay him?

Although building a deck seems simple, there are codes and methods that build a better deck. How many decks have you built?

Insurance is necessary in today's business world as someone will eventually fall and blame it on you.

This is a seasonal business in Chicago, what will you do for the other 6 months?

If you have a job now and it is paying for health insurance, vacation, sick leave, workers comp, ans so on, can you give that up??

50/50, as mentioned sounds good going in but is a nightmare to split up, one votes one way the other not.

In addition to earning a good salary and paying all of the expenses, you will need to repay the money you loan the business, with interest.

All of that equipment is used so will need to be maintained and/or replace sooner than used.

I could go on, but those here have heard the list many times from many others.

Yes, there are businesses you can buy, but this one doesn't sound like a good one.

Bud
 
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Old 04-21-16, 05:04 PM
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First of all, don't get confused on the value of the tools. You are looking at replacement cost not the current value. In other words, let's say that you had insurance, on the tools & they were destroyed in a fire. The insurance company would not pay you replacement value. They would depreciate it, to flea market prices.

If you really want to buy the business, try to get the current owner to "hold the note". That means that he doesn't get the full $24,000 right away. It's his problem that he's 84 not yours. Maybe you give a third & make a payment plan. I bet that no one is banging on his door in a rush to buy the business.

I even have a better idea where you don't put any money down. You & the partner run the business, use the tools & guarantee the owner so many dollars per month. Let's say $5,000.
 
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Old 04-21-16, 06:50 PM
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Thanks for the advice everyone. These are all some very valuable points. Great things that I will bring up when I meet with him this weekend.

My wife and I have always dreamed of owning our own business so when I stumbled upon this opportunity I got excited. I have had a lot of thoughts on it both pros and cons. I am looking for a new opportunity and career path then what I am doing now. I am currently a welder working for the man and there are a lot of things as mentioned that would be difficult to walk away from. My passion is hard work and I would like to find a way to work for myself. As far as experience in the field I have very little, but I am an avid builder by nature. I build sewer cleaning trucks and trailers right now, I have helped family members build their houses, I excelled and enjoyed wood working in high school and built a very elaborate gun cabinet, and I am constantly building little knickknack sand projects. I know that doesn't mean I will be an expert deck builder right out of the gate but I gained a ton of experience in using machines and tools.

Now let me ask you this, would it be wiser to offer to buy the business outright on my own and hire the would be partner as a foreman and use his experience in that sense?
 
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Old 04-21-16, 06:58 PM
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Now let me ask you this, would it be wiser to offer to buy the business outright on my own and hire the would be partner as a foreman and use his experience in that sense?
No Way. That's way too much money for someone who doesn't know the business & he won't work as hard if he has no financial interest.
 
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Old 04-21-16, 07:34 PM
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Running a business and working in any trade are two entirely different jobs. Not only will you have to learn the deck trade but learn the much more difficult skill of running a business. Check the statistics. A quick search showed 8 out of 10 businesses will fail in the first 18 months. These numbers have been around for decades, they are not just some part of current economic condition. Then, of the ones who make it through the start, the majority of those will fail in the first five years.

In addition to the up-front money to buy the business you will need at least 3 years of income in the bank to hold you until the business gets established.

Start by having an accountant review the numbers you will need. You will need an accountant anyway. He/she will review the books from the owner and look at projected income needs. You will be devastated when you see what you need for an income to stay afloat.

I mentioned before the seasonal aspect, summer/winter or whatever. Many businesses have their good times and bad times. Do you have plans to fill the gap.

Does you wife work where you can at least be covered under her health insurance?

Play with the numbers. What will the average deck sell for? How long to build? How much profit? Remember, building decks is a no brainer business so you will be competing with every thumb pounder who needs a few extra bucks.

Does the existing business have a collection of builders who regularly use that business for their decks? If so, how many per year.

I realize it will be impossible to talk you out of this idea that you are already sold on, so I'll leave you alone and wish you luck.

Bud
 
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Old 04-21-16, 08:05 PM
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Absolutely not sold on it. I am just looking for different angles and views. As I said earlier I have my own pros and cons list I am just seeing if you guys have anything I haven't thought of yet. I am no dummy here, I know it wouldn't be easy and I know I would have a lot to learn, but I didn't know how to weld, or build tanks, or trailers before I tried either. I believe in myself and I think I could do it. I just want to see what else I may not have thought about. Thanks again! I appreciate all your advice!
 
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Old 04-21-16, 08:05 PM
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Another question that should be considered is does the purchase of the business include taking over the previous owner's guarantees and liability?
 
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Old 04-22-16, 04:50 AM
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My wife and I have always dreamed of owning our own business
Many of us have had that dream and it can be viable but it is almost always best to start/buy a business that you already know. Have you considered some type of welding business? Many of us started out working part time for ourselves while still holding down a full time job as an employee. That takes away a lot of the risk!
 
 

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