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Soder

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I have an opportunity to buy a business.

Maybe it is not a good idea, since the best thing is to create a business, not buy it.

Having said that, I will comment on the detail to see what you think:

This is the business of an old artisan who creates fishing lures with some mechanical machines that he has designed himself. The lures are very good and practically impossible to copy since he himself has created the machines: simple, nothing electronic or digital, basically they are lathes designed by him.

The business currently has sales of about 200k USD and with large margins (in the end the material is simple: wood, wires, hooks, ...) with what the benefits are over 100k, with few hours of work per day It can also be delegated since the tasks are mechanical.

The production is perfect but the marketing and sales channel is very old. You can't buy online, you can't pay with card or paypal, etc.

The owner sells it for 600k. The price includes all the inventory that could practically be sold by at least 300k.

I honestly believe that it is worth attending to its benefits and its potential. But the idea of borrowing so much or looking for investors doesn't seem the best way, especially for a business that although it works well, I have not created and I am not an expert.

Practically I have decided to say no, but I told you to know how you see it.

Thanks and best regards.
 
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MHP368

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Seems like a terrible business to buy from what you've described.

You say that the process can be automated but can it? It seems like the old artisan owner is the lynchpin and he wants out. So the only way this makes sense for you is that you pay him 200k upfront and the rest is tied to him staying on board for 3 to 5 years and making sure the company doesnt collapse.

His job as a business owner beforehand should have been removing himself from the equation.

So yeh i'm sure with an online sales channel and marketing you can increase sales , but if the creative director and the only one who knows how to properly design and build the latches is gone then whats that worth?

Are all his current xlients around because the latches and fishing lyres and things are so great or is the product merely above average and all the business is tied to the fact that theyre getting custom orders and 24/7 service from the currwnt owner?

Seems like you buy this guy out and he goes and moves on and on day one youll find half the clients gone and week 2 you figure out you can no longer make the inventory in a quality way.
 

NMdad

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Have you ever owned a proper business? If the answer is no, It's probably not a great idea to drop 600K+ on one...
Agree. If you want to get started in business by buying an existing business, start with something smaller--where you won't be destroyed financially if the business fails. Decide how much you can currently afford to pay for the cost of tuition to learn how to operate & grow a business.
 
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ZCP

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Gabry_ITA

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Hey Soder, I think that you made the right decision for many reasons:

1) as you said, the best thing is to create a business. Also, you can't buy Fastlane, you've TO BE Fastlane, you know.
2)"...few hours of work per day. It can also be delegated..." Yes, but if you delegate you've to pay the person(s) who do the job instead of you.
3)Reading your post, I think that you could improve this business: you spoke about e-commerce, Paypal ecc. ecc. but you should do a perfect research-work to understand the online market about fishing lures; maybe there isn't potential (but I suppose that you did a research!).
4)600k is an important amount. You should pay a loan/convince investors; you probably should pay to design a good website (or design it yourself if you're able but it needs a lot oftime); you should eventually pay for labor. After all these payments: will you have enough money to survive? will you have enough money to pursue indipendence and a freetime-life?

I don't know you. So, if you are a strong person, have strong skills and the market has effectively potential it could be interesting.
However, imho, you made the right decision to say no.
 

minivanman

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I don't have a problem buying in to a business but the idea should be to buy a business worth $600,000 for only $60,000. If it's not the best deal in the world, then pass it up every time. Remember.... he has 1 business to try and sell while YOU have hundreds of businesses to choose from if you choose to buy. Offer him $60,000.... if he doesn't take it, tell him thank you and if you change your mind, let me know. This is how you need to do every deal in your life.
 
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ShamanKing

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Curious to what type of fish. Is this saltwater fishing or Bass fishing?
 

Soder

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Thank you very much for all the answers.

I see that in general you agree with my decision to say no, principally for the following reasons:

- Indebt you only see it good if it is for a low percentage of your assets and for a business that you know perfectly and have the cash flows very predicted with great margin of safety. Only debt can make you break, beware of it. Agree @Omega and @NMdad.

- To take a successful business you have to be a complete expert on it, try to have that passion to try to know everything about the business. I am not an expert in this business and although it can be learned and mechanical, the entrepreneur and the designer is not me. Much of the business is the owner. And he knows it, so he is not desperate selling it, he wants to leave it as an inheritance but his children are not willing to take it (maybe they have a reason for it). Thank you @MHP368 and @Gabry_ITA

- I commented to him the idea of buying it for less money or making a partnership with him, but he is not willing because for that option he can do it alone. Absolutely agree @minivanman

- Customers buy the product because it is good and would continue to do so if it continues to be manufactured. In fact, they continue to sell as there are inventories that the owner will sell even he hardly makes new ones, since he is very old. @MHP368 It's a bass lure @Neng Her

This idea came up a few days ago and did not seem very good, but now it seems really bad, at least for me. Only time is giving you a clear vision of things.

Thank you guys.
 
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MHP368

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To take a successful business you have to be a complete expert on it

You're welcome but I wanted to clarify you absolutely don't have to be technically savvy to run this or any other business , the problem is can you teach someone else to do what he does reliably and repeatably.

I'll see you around the forums!
 
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biophase

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That business sounds interesting to me. I'd be interested in it because I like fishing and would love to do a lure company. With that said it's probably worth $250k at the most.
 

Gabry_ITA

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You're welcome. I think that now you know something more than before this experience and you're one step closer to an important goal.
You did well: you waited, thought, asked and only after...decided! Well done.
Good luck, see you around!
 

100k

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The price should be closer to $200 to 300k with half of it being seller finance.

At $200k to $300k I'd be tempted but as others said, is he a lynch-pin ? Is he irreplaceable? Will he stay on the job to show you the ropes for X months?
 
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Soder

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The price should be closer to $200 to 300k with half of it being seller finance.

At $200k to $300k I'd be tempted but as others said, is he a lynch-pin ? Is he irreplaceable? Will he stay on the job to show you the ropes for X months?

Yes. He agrees to spend a few months teaching the business. Although the machines have been invented by him, work is now mechanical. While learning everything is essential to be able to run the business.

--

Thank you guys. I said "NO" to this business, for everything explained and also because I am already in my own business and as indicated by MJ "choose monogamy over polygamy", although sometimes it is hard and we want to skip stages (and time), success only comes from being focused at 200%.

The interesting thing about this post is that I've passed the idea and contact to a friend and he will try to negotiate the conditions with the owner of the business. If there are advances I will inform it here.

You guys are the best teachers.
Thank you.
 
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Soder

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Update:

Everything seemed finished but my friend is trying to convince the business owner to allow us to boost his business by creating a society where he would receive a percentage of the profits and we would put the work.

We have realized that he doesn't want his business to disappear, and this is an opportunity for us. It will not be easy but it is worth trying.

I will update.
 

Soder

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Update:

Because the owner saw that his business would die, he has allowed us to re-launch it at no cost to us, sharing the benefits with him and his son.

So he will continue in the business, teaching and advising us, what is basic for the success. While we focus on improving marketing, sales channel and distribution. In the future we will expand the range of products that the owner already has some ideas.

Whatever happens we have been very lucky, but we have looked for it, me first and my friend after, earning their trust.

The product is very good: it offers large margins and is practically non-copyable because it is handmade.

The sales channel, as I mentioned, is prehistoric and the marketing nonexistent. We will focus on it.

I encourage everyone to be fully alert of opportunities continuously, this opportunity was seen by thousands of people (all clients were announced that the business was going to close) and nobody was interested in it, only me.

I will continue updating.
Thank you all for your opinions.
 
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ZCP

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Because the owner saw that his business would die......
This is a massive negotiating point. You need to see both sides of the sale! A lot of these business owners retiring and selling don't necessarily need more money or a large chunk of money at once. ASK THEM! You might be surprised at the sweet heart deal you can get if you 'keep it going' or 'keep their name on it'.

Two examples: when we bought our vending business, the owner spent a day with my kids and saw how they would keep it going .... even talking about how they would sell it to the next group once they went off to school. Price came down. He spent more time coaching us. Even found us deals on more machines.

@Greg R 's deal ..... kept the name and showed how it would grow. Deal then made itself.
 

Soder

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Yes @ZCP my experience has been like this. The owner when he has taken confidence with us has shown us gratitude for helping him to expand the company.

We are currently creating the web with online shopping, managing to include the product in Amazon and talking with fishing societies, many of them knew the brand and are happy that the company continues and that there is going to be an online shopping.

The best part is that the initial investment is low: no money, just create the web and managing procedures and calls. Since it is a business that is already working today.

It looks good, we will go step by step doing it the best possible.
 

Ernman

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sharing the benefits with him and his son.
The "and his son" part caught my eye. Be very careful with this relationship. A friend of mine spent five years helping a guy rebuild his business with the agreement that the guy would retire and sell the biz to my friend over time. Unfortunately for my friend, when the son saw the biz taking off again, he convinced his dad it should stay in the family. My friend was left hanging. I encourage you to make sure all agreements are clearly written down and signed. It may be uncomfortable, but you must address the son's attachment and future potential ownership. For instance, if it is in the father's Will that the son will own the biz you could be in a legal mess when the father passes.
 
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