Anyone own a manufacturing business?

[dgorila1]

I have been approached by the owner of a machine shop who is retiring to buy the business. We haven't sat down and talked details yet since he just asked last week, but I have been thinking of this opportunity for about a year, since I knew he would be retiring sometime in the next few years and I have gotten to know him and the business pretty well because we use him at work regularly. He would stay on to train me in the details of machining ( I was a welder/metalworker for many years so I know the basics of machining). I'm interested because I could work for myself and make a good living at it if I play my cards right, but at the same time I'm hesitant. I would have the debt of buying the business from him, plus whatever upgrades I would need to take it to the next level (our company is basically his only customer and we have reduced the amount of work he gets substantially in the last few years due to budget cuts), and the monthly operating expenses (electric, rent, loan payments, website, etc). I don't know if I am comfortable taking on all this extra debt to go along with the household debt we also have. I guess if I could be assured I could bring in a monthly income like I currently have, I would be more inclined to jump in. I see the potential to grow the business, especially by seeking out work such as government contracts, inventing/making/selling product ideas I've had for years, etc. I know him pretty well, and he wouldn't offer this to just anyone. He would rather shut it down than sell it if he doesn't find a person he trusts to take it over and maintain the high standards of work he holds himself to, so I feel grateful he trusts me enough and values my work ethic/attention to detail to even offer. Does anyone here own this or a similar business that could offer insight, knowledge, advice, etc? Its a hard decision to make, but I'm sooooo tired of working for others its very tempting. Thanks.

[Still Growing]

Let me commend you on seeking advice for a new venture. Its important and I always do this before buying or starting a new business. Let me give you an entrepreneurial perspective about what you are thinking of undertaking.

Manufacturing: This is really fabrication not manufacturing. A good and efficient manufacturer has a production line whereas with a fabrication business its like a job shop. Each job is unique and so you must make more profit and do less jobs.
Business: Although this is technically a business you are really thinking of becoming self employed.

What are you buying? You said your company is his only customer so there really is nothing to buy but tools. Seriously. I hope you are getting a good deal on those tools because there is really no business to buy there. If the amount you'll be paying him is more than the cost of the tools new then you are overpaying unless he is the one financing.

I think its great you are wanting to move up but your verbage and thought process are really not where they need to be to set up a good deal for yourself.

Heres what I would do in your situation:
1. Get inventory of all his tools. Shop them new.
2. Immediately ask him in writing not to mention this to your current employer. Deals come and go and you don't know if this will work out but you don't want to loose your job in the process. If they think you're leaving they will start looking for your replacement.
3. Negotiate with him on the price of the tools and other assets you'll need.
4. If you are going to pay more than the value of the tools, get him to finance the business over 10 years with no interest. He'll shun this at first but give him more time and he'll come back. If somebody else buys this business let them be the sucker.
5. Get your lawyer to draft an agreement giving you a lot of outs. There is only customer here c'mon.
6. Once you have a offer document that needs your signature for completion then go to your current employer and ask them for their graces. Outline what you plan to do and humbly ask for their continued business. Be sure to ask management or the owner. If they feel good about it and give you the thumbs up you're on

What I have outline above is an example of how an entrepreneur would approach this. This isn't about machining its about business.

People think that a shrewd business person is dishonest. You CAN be shrewd and honest. Doing otherwise would only be dishonest to yourself.

[dgorila1]

Of course theres more to it than I mentioned. I tried to be brief while still explaining the overall offer. You're correct in that it is fabrication instead of manufacturing.....terminology :-) We haven't met yet to discuss the specifics, although I know it'll most likely be owner financing and I'll get it for a good price. I've known him for 5 years now and we have a good working relationship. He knows my work habits/attention to detail, which is one of the main reasons he is offering me the business. He's also old school (i.e. his handshake is his bond, although you always get everything in writing).
If I bought it, thats why I said I would have to "take it to the next level". I would need to diversify and not rely on only one customer. Thanks for the input.

[dpgiffin]

My dad owns a very sucessful Interior Fixtures and custom woodworking business. I am a 20 year old college student who is transferring home next semester to begin to work there while getting a business degree. This is setting up me taking over the company. As much as i love and respect my dad, i never wanted to do this before. However, recently I have began to imagine different directions to take the company. I can see us branching out. This has drawn me into it.

I know you're not coming into the success I am, but if you can get passionate into the new directions and success you can have with this business, then you have something special.

Do not take the business and see only what you're getting. See what you can do wiht it, what it can do for your life, and what it can do for other people. If you can be comfortable with the last two, then you're in a good place.

[dgorila1]

Griffin,
Those are my thoughts too. I'm going to talk to him this week and set up a meeting so we can sit down and discuss specifics. Once I get the specifics I can see if it still interests me. I have many ideas on ways to diversify the business. Don't get me wrong, he has made LOTS of money since he formed the business for the express purpose of doing work our company needed. Now that we have grown and tightened the financial reigns, the income to his business has gone down significantly from what we used to give him. He is 65 and built up enough to retire now (he started the business after his ex-wife got everything in his divorce). Thats why I think he wants to "pass the reigns" on to someone he trusts, since he has no kids or relatives. I'll keep you updated on what I decide after talking to him.