There are some on this board who are very business savvy. It is my hope someone could perhaps offer some advice for my situation in reguards to building my own business or buying small shops. I will first give you a bit of back ground as seeing it would help with the question.
I live in Nassau County Long Island NY. I am 28, not married, no children, and do not own a home. I been in the HVAC/R industry for nine years, the last two of which I have been running my own business. I was always a loyal employee and at no point kept a customer list of my employer’s accounts to take with me when I left the company. Being I had missed the yellow book, my only resort was to engage in subcontracting for Fuel Oil companies (which is a story for another day). I was lucky enough to get 8 to 12 calls a day, and being the condition of the equipment, most of these calls would lead to burner, boiler or oil tank replacements. Needless to say it was difficult to make any real money at 45-50 dollars a call, when I was a legitimate sub. I carry the proper license, insurance and workers comp. After “suffering” throughout the spring (cleanings on accounts that haven’t been maintained since they were installed) and “suffering” throughout the winter (Fixing equipment that should have been condemned, and running out at 2:30 in the morning for a $50 call). It was now spring again. I couldn’t in my heart do “commission based” calls for the air conditioning company I had been a sub for this past spring (again a story for another day). It was also difficult to continue running calls for various fuel oil companies at 45 dollars a call. I was tired and felt beaten, but amazing as it were had enough funds do finally advertise. Close to $30,000 to advertise to be exact (please realize this money is paid over the course of a year, however through forecasting it would be no problem to recover).
So advertise I did! Quarter page business to business, half page 3 rd position County, and the 15 book buy in various North Shore towns which include 1/8 page ads under Heating, Air Conditioning, Fuel Oil, and Refrigeration. (Not sure what this will mean in terms of money to other owners in different states, however here in NY it’s a pretty penny). For those “New” owners out there scratching there heads wondering how to get more business, I have one word “ADVERTISE”. I went from doing one call every two weeks from the penny saver (the one call was not including the various sub calls) to hiring my brother (who was a local 638 B side mechanic) as a lead installer and two helpers to handle the 2 to 3 installations a week. I had to also hire someone to field my calls and run my office (happens to be my gf) while I handle the service calls, sell jobs, and get material together. In asking around I am doing better than most here on the island. Currently the nights are rather cool, which is a factor for service and most replacement installs are coming from long time customers ready to upgrade, which in my case, don’t exist. One set back about the book is I normally get the “problem “customer that was abused by the competition, and at ever turn is ready for you to screw them over one way or another. However, all in all we are doing well.
I am not sure if it a growing epidemic, or if I notice it now because I am an owner and in touch with others who operate their own business. Many of the one man operations are folding, and under the same circumstances. Their wife is leaving them, their children are now 13 and they can’t remember seeing them since they were born, haven’t been on vacation since they have gone into business, and well, I am sure you get the idea. So what does this mean for me? I have been approached by several owners who are ready to sell off their business and one as of late who is ready to sell his house, business, and anything that is tying him here to NY.
So what’s my question!!
Well let me tell you a bit about the business. The business was incorporated before I was born (early 70’s) It was sold to the current owner close to 14 years ago. It is recently a one man shop being after personal problems he had to let 4 employees go and is basically dwindling down the business. The business is service orientated, with approximately X or so LONG TERM active accounts (mainly a/c and refrigeration).
Now it’s not what the owner is asking for the business that bothers me (because the figure is peanuts), It’s the fact that his base of operations is 2 ˝ to 3 hours away from my current customer base. There would be no way I could keep my current customers happy, while expanding on his business, I also have the fact that my brother and helpers would have a 2 hr or so commute each morning, so I am not sure how long they would last. My gf currently lives in the city, and stays with me during the week in order to do paper work; the commute for her would be that much longer. I also have all that advertising that I had taken out there on the street, I would still be able to cover it, but if that far away it would be difficult/ impossible to cover the calls.(In NY customers want it, and they want it NOW!!, so waiting for me to get there would be unacceptable). This company is seasonal in that they have done no heating of any kind in the past, and it would have to be marketed to current customers in order to grow. When considering the density of the population, this county is half or less of the one that I currently reside in (which is less potential customers). When I mention the fact of expanding in the supply house, most the “old timers” laugh so hard they almost fall down, and tell me that I am out of my mind and should stay a one man shop. I was told by several people that advertising takes 3 to 5 years to take off being most homeowners keep their old listings around. After investing the money I already have into the area where I am currently located. I figure it would take no time at all to build up a decent following.
On the plus side, the company is located on a part of the island I would like to some day move to. The houses are on big lots, and the county as a whole is growing (New installations and potential long term customers). Here in Nassau County your neighbor can pretty much look out his window and see into yours. I would also be dealing with customers that feel comfortable with the company they have been using for years (makes a big difference in selling new equipment, and customer relations).The customer base is ofcourse more extensive then mine.
To end this off, the price of the company would probably cost me a bit more then what I was going to spending in advertising for this coming year, however as we know advertising really gaurentees nothing. But in essence buying this company would change my life(being i would mostlikely have to move). So I ask, is it better to take over a business that has been running for years, however relocate? Or to try and run one from scratch? Remeber to take into consideration, my business is still new and the service work/start ups that we did this year may not be there next year. We are still too young to tell who is going to be a loyal customer.
(I am sure I am leaving a bit out, but this is long and boring enough)
Any advice is welcome.
I would check to see what kind of reputation this Business has in the area. You might just be buying a bad rep. If it's good and you don't mind moving, it could be a bargain.
A little research now, could save a bad move.
A Diamond is just a piece of coal, that made good under pressure!
Did you know that the Small Business Administration can put you in contact with and match you with a retired business owner who will review your business and business plan to purchase the other business? And it is a free service with the SBA.
By reading your post it seems your current business is doing well. Maybe not as well as you would like it to, but doing well enough to make a living. It's a new business and you are growing. You're gathering up a customer base and a following that not only is paying your bills now but with "word of mouth advertising" will continue to grow.
My opinion, and that is all it is, would be to stay right where you are at and continue doing what you are doing. The other business may be set and have been done well in the past but it doesn't seem to be doing that well know. A loss of several employees doesn't just mean internal problems but could possibly mean external (customer) problems. People trust the name the first time but trust the technician after that.
I would stay where you are at and wait to see if another shop goes up for sale around your area. When the business gets large enough to sell and you want to move out of the area do it then.
What ever you do, Good Luck.
An opportunity not taken is an opportunity lost. There are not many good ones lying around so listen to the above posts and do your research.
Start by asking where the 4 old employees are. You can do that by asking the local supply houses if they know where these guys are now. I will bet you will find one of these old employees just started his business and possibly using your future customer list.
If you like what you hear from these guys consider taking a partner. Make an offer to the guy that just left to start his own. You should be the Sugardaddy and control the majority interest stock. He will be the workhorse and share in the profitability/loss.
Work on building a future for more than just yourself and delegate the responsibilities. Share the profits and take very good care of your employees. Learn to shut down the business and develop a family life and let your employees do the same. Actually you should demand it for your and your employee’s sake.
A. Key requirements for business success
- 1. If you make a mistake and don't learn from it, nature will allow you to make the same mistake again and again until you finally learn "the lesson", and then you have judgment and wisdom.
2. If you are not doing something which is moving you in the direction you want to go, then you are probably moving away from where you want to be.
3. One of the major reasons for failure is the inability to focus single-mindedly on one thing at a time.
4. Believe in your ability to succeed.
5. You must believe yourself to be capable in this field.
- 1. John D. Rockefeller said that the two most important requirements for business success are Patience and foresight.
2. Organize and coordinate the factors of production to produce the goods and services that people want at prices they are willing and able to pay.
3. It is the wants, needs and desires of the customer that determines all business activity. It is not what producers produce but what customers want.
4. Profits are always a result, they are not an objective.
5. Success comes from developing excellence in a particular market related area.
6. Do the little bit extra, because if you are contributing greater value than you are taking out then you know you are always growing in success and income.
C. Ten reasons for business success
- 1. Product of service is well suited to the current needs and requirements of the market.
2. Complete business plan is developed before commencing operations. Doing a business plan shows the world you are competent and able to run a business. The inability or unwillingness to develop a plan shows incompetence.
3. Tight financial control, good budgeting and accounting.
4. High degree of competence, capability and integrity on the part of the key staff.
5. You should hire only those who you need and only those who can do the job.
6. Good internal efficiency, clear job descriptions.
7. Clear output responsibilities and good time management.
8. Determination, persistence and patience on the part of the Management.
9. Good communication among the staff.
Just my opinion... best of luck on all things
You could get some more input and money input in the site supporter area, we can discuss pricing and everything there.
Make sure you are R-E-A-L careful about mixing gf with business!!!
She can be a most valuable and supporting asset or . . .
Someone much wiser once said something about, "Two walking together must agree."
Geographically, you cannot split yourself between the two locations.
However, since you seem to have a nack for running a business, why dont you look into buying the other business and selecting a trustworthy person to put in 90% charge of it.
And retain the old owner for a transition period. Say one year 3/4 time and then ramp down to 1/4 time by the end of ...say two years.
But do your research to determine the older business is NOT a headache about to break you.
Print out on paper what has been recomended to you here. Look it over daily.