Adventures with lyrical - buying a business
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Shonuff
Mr. Poopybutthole
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It may be different in your town, so don"t give up. Most of the time you are going to need a ton of cash ($100K in cash equivalents), but like I said, two of my friends have been able to make a good living starting up for less than $1k. To be honest, you better hit the nail on the head for starting up with $1k, there"s not much room for mistakes.DisgruntledOrangatang said:
Shonuff
Mr. Poopybutthole
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So the new Internet strategy is starting to take off. We aren"t seeing a drop in sales like the rest of the economy, because if there are less calls coming in from other customers, we are getting more calls from people that solely use the Internet. I think in today"s economy, if you own a business, you just have to do things better. Your employees have all the excuses in the world, but right now, if you get a customer, you better take care of them. And you need to be cost efficient, we were spending 10K more a month on stuff where there was no reason to (other than no one questioned what they were spending in the past).
I am thinking that 15% of our customers this week said they found us on the net. 50% of the customers are either past customers or referrals, and the remainder is from the yellow pages.
I can"t wait until I get our Internet advertising finely tuned, it seems like it takes forever.
I am thinking that 15% of our customers this week said they found us on the net. 50% of the customers are either past customers or referrals, and the remainder is from the yellow pages.
I can"t wait until I get our Internet advertising finely tuned, it seems like it takes forever.
Yessir, the internet is "the way of the future" as they put it. What is your marketing strategy for internet advertising? Just sticking adds on lots of sites can often be a waste of money. What is your website btw? Just curious to see what you are packing.
Oh yeh also, how did your friends start a business on that? Heh.
I also have various website ideas which are probably the best place to start since creating websites has very small overhead, of course it"s also very hard for websites to take off given the extreme saturation of the internet, but if your idea is solid and grounded in reality it can be done. I have one website that is like 90% done, but the one developer I had helping me bailed and now it"s been a few months so ><.
Oh yeh also, how did your friends start a business on that? Heh.
I also have various website ideas which are probably the best place to start since creating websites has very small overhead, of course it"s also very hard for websites to take off given the extreme saturation of the internet, but if your idea is solid and grounded in reality it can be done. I have one website that is like 90% done, but the one developer I had helping me bailed and now it"s been a few months so ><.
Shonuff
Mr. Poopybutthole
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There is a 0% chance would post a link to my site on FOH. As Tuco has reminded me, there are too many psychopaths on this board, and I have NDA"s with some of the wealthier clients. Tuco"s already told me that I have gone in too much detail, and that I should sanitize my posts of any personal info. I am not going to run the risk of losing a client that gives me $40K+ a year in business, and I am not going to have my phone lines clogged up with fake people asking for free estimates. They might be free to the customer, but they cost me quite a bit.DisgruntledOrangatang said:
As far as the Internet goes, we are running a website, are on all of the Internet directories (yellow pages, super pages, etc) and doing google adwords. The goal is to be on the first page of an internet search. The search engines don"t always do this (as we still need to do more fine tuning), but in these cases, they are showing on the first page because of the internet directories.
As far as my friends go, the best example is my friend who owns a business that does gymnastics for kids. Him and his wife started on $800 (for equipment), and he was the one running the classes. Now they have hundreds of kids paying them $30 a month, and he has 10 employees that teach classes for him. Since most of the schools have to give some sort of PE, they benefit from this. And recession doesn"t really slow them down - if they want to make more money, they just add another school. They are only limited by having qualified employees. They have a great reputation and feel that they can"t add more than a school a year without watering down the quality of instructor.
Shonuff
Mr. Poopybutthole
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For anyone that cares:
So I am seriously considering buying another business. I am kind of bored. Between having a secretary and two managers that know what they are doing, I am only working two days a week right now. What am I supposed to do? Play MMO"s five days a week? I am just not wired to sit around doing nothing. I am pretty sure that with the team I have in place, that they can run the business whether I am there or not. If I buy another business, I plan on paying the managers a percentage of the profits just to make sure that we have the same goals.
I am having the broker who sold me this business present me with some other businesses tomorrow. I am noticing that there are more businesses selling for one times earnings right now. And I don"t know if its because there aren"t enough buyers, or its something more sinister. So there are businesses netting 400K, going for 400K. That looks great, but there has to be a reason they are going for so cheap. From my almost a year looking for my first business to buy, I know from experience that if something is going for less than two times earnings, its for a reason.
Hopefully it won"t take me a year to buy another business, but I am thinking that the scammer ratio has gone up with the way the economy is now. But I want to expand now, while I am still young, so I can get the businesses paid off.
So I am seriously considering buying another business. I am kind of bored. Between having a secretary and two managers that know what they are doing, I am only working two days a week right now. What am I supposed to do? Play MMO"s five days a week? I am just not wired to sit around doing nothing. I am pretty sure that with the team I have in place, that they can run the business whether I am there or not. If I buy another business, I plan on paying the managers a percentage of the profits just to make sure that we have the same goals.
I am having the broker who sold me this business present me with some other businesses tomorrow. I am noticing that there are more businesses selling for one times earnings right now. And I don"t know if its because there aren"t enough buyers, or its something more sinister. So there are businesses netting 400K, going for 400K. That looks great, but there has to be a reason they are going for so cheap. From my almost a year looking for my first business to buy, I know from experience that if something is going for less than two times earnings, its for a reason.
Hopefully it won"t take me a year to buy another business, but I am thinking that the scammer ratio has gone up with the way the economy is now. But I want to expand now, while I am still young, so I can get the businesses paid off.
Ill tell you the sinister part. The economy is fucked and that disclaimer that says "past earnings are not indicative of future earnings" is relevant now. Even if these people are telling the truth about their business history, it wont be like that in the future most likely.Lyrical said:
Perhaps in business that deals with the super wealthy as clients this is not so much a problem. But business elsewhere is struggling. Earnings and numbers from 5, 3 or 1 years ago are no longer relevant. Expect things to get worse and stay bad for years.
Having said that, there is also a lot of forced sellers who are having their credit lines cut and can not refinance debt trying to get rid off stuff while they still can. Perhaps there are opportunities here.
So yeah, its a mixture.
Shonuff
Mr. Poopybutthole
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I honestly don"t give a rat"s ass about the economy. If I am looking at a business that has been around for decades (and lived through several recessions), and either sells products where customers are price insensitive or sells a necessity, and I can get it for a good price, I am in. Also, if its something where I can make improvements (like in this business I cut out about 10K a month in unnecessary expenses, and started using more Internet advertising), again, that is a plus.rinthea said:
Some businesses are still holding their water just fine in this economy. I am looking at an agri-business that pretty much isn"t going to be impacted by the economy as much as other businesses. People are still eating. And another area for opportunity might be in a repair-type business. People might not be buying new stuff, but then they are more apt to get it fixed.
I will be super-selective in buying the next business, even moreso than on the first.
I"m curious about this, could you give some more concrete examples of the cuts in expenditure you made?Lyrical said:
Shonuff
Mr. Poopybutthole
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I thought I already did earlier. Anyway:Koivu said:
1- We had two people leave. One moved to be closer to family, and another self-selected himself by leaving tools on the job, and irritating everyone else on his crew. When your fellow laborers keep giving constant complaints about you to the boss, its time to go elsewhere. So that is about $4k a month there. Since this is typically the slowest time of the year for landscaping, we"ll look for replacements in the Spring.
2- In order for us to get the bigger clients (who want us to be fully-insured), we spend a ton of money on insurance. They want proof of it, and they ask for copies and call the insurance company, so there"s no faking it. Typically, in the last three years, the amount we pay for insurance has approached $100K annually. When I took over, we did some price shopping, and actually signed up with AIG for $13K a year. That"s an 87K a year difference! You never actually send claims in, so getting paid isn"t really an issue. The seller didn"t look around and price shop like we did, so he had no idea that there were better rates.
3- We switched our phone bill to MCI, who is offering us rates at a third of what we had with the previous carrier. That will be $300-400 a month.
There have been more changes than this, but this is what comes to the top of my head. The previous owner had no explanation as to why some of his expenses were so high, other than maybe he is older (age 65 I think) and he got complacent. Usually, if someone is making 200K+ a year in a business, they get complacent and quit trying to make improvements on anything.
I don"t want to cut any more people, but there are probably more expenses out there that can be cut without impacting operations. I probably am going to look at doing another round of cost cutting soon. The saying is that the new owner shouldn"t make any changes for six months, so I am loathe to make more changes until I understand how the changes would affect ops. The worse thing I can do is to cut out necessary expenses, or lower our customer service by cutting too much. Our clients expect a superior level of customer service, and these rich people care more about that than the price. If we were to lower our level of service, we"d be like any of the dozens of companies doing what we do, instead of the biggest in the area (for our niche in the landscaping industry).
Arative
Vyemm Raider
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Are you specifically looking to buy an established business? Or would consider starting a new business that is a franchise? I read an article a long time ago on cnn about starting a bio-diesel production plant and this company that sells pre-fabricated turnkey operations. Figured with Obama"s new push for green energy, renewable energy is a good business to get into.
Here"s the link for the company.
Xenerga : expanding alternative energy
Here"s the link for the company.
Xenerga : expanding alternative energy
My commercial auto insurance went from 77k a year to 37k by switching to AIG. I am not counting on that staying the same when my policy renews in April. Now maybe im pessimistic, but AIG was desperate for cash, and I think the higher ups knew full well what loomed and basically ordered everyone to take any policy. It"ll be interesting to see what comes. But heck going from 100k to 13k or so rocks. Did the old insurance agent (if you had one) shit a brick? Mine did.
Anyhow, from what I"ve heard, healthcare staffing businesses are doing very well. This does not include the nurse or aides in the home type business...that business is a giant nightmare for anyone coming in without experience.
Anyhow, from what I"ve heard, healthcare staffing businesses are doing very well. This does not include the nurse or aides in the home type business...that business is a giant nightmare for anyone coming in without experience.
Thats just dumb. I dont believe your dumb, so I dont believe you dont give a rats ass about the economy. Which you admit, when you say you are looking at repair type or agri business.Lyrical said:
Theres no such thing as price insensitive customers.
This isnt a normal recession its worse than the 1930s. From memory the only company that was in the Dow Jones index pre 1930 and is still there today is GE and they wont last this time. Business that survived the last 10 recessions are now, and will continue to go out of business.
Business is at the mercy of its environment. Its environment changes.
Dont get arrogant, think your the greatest and fuck up.
i.e its interesting you switched to a bankrupt insurance provider... did you know u were making a $87 grand bet that they would be bailed out?
Shonuff
Mr. Poopybutthole
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I don"t want to mess with a start-up right now. One day I do, but for now, I want to go with businesses that have lasted through multiple recessions. I know some business people that go with safe bets, and then start doing other "pet projects." Then if the new start-up fails, they have enough cash flow to absorb the losses without going bankrupt.Arative said:
Shonuff
Mr. Poopybutthole
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The agent acted sleepy and didn"t really acknowledge it. But the seller flipped out. He said there must be something wrong with the fine print, and then looked over the policy, and still couldn"t find any problems.Ralphus said:
He had a habit of not looking for competitive bids in just about everything. I have no idea what the premium will be next year, but I should take advantage of it, and if someone starts telling me they want upwards of $40K, shop it around. Its a lesson I have learned from this guy.
Shonuff
Mr. Poopybutthole
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I am big believer in personal responsibility, and in this case, it extends to the staff.rinthea said:
1- I constantly remind them that there are 29 other businesses doing what we do. We have to give great service. Last week, when we were bidding jobs, 65% of our final sales came from referrals. They all said that someone else on their street said we did such a great job. I drum it into the staff"s head that in this economy, you have to TCB. We are running a huge bid today that would be equal to about two week"s business, and again, the customer came to us because someone else said we did a great job for them. I doubled our ad budget, but taking care of customers is a much cheaper way to bring in new business.
2- There are no salespeople in the company. The seller did the sales, and most of the time, he just told people their price and left. At times, he barely closed 25% of the bids he put out. He just put the price out there, and refused to negotiate. If the average rate was $225 an hour, he wouldn"t go down to $200 an hour even if it would save the deal. We still make money at $200 an hour, but his attitude was that it was all or nothing. And the attitude has carried over to the staff"s attitude. When talking with customers about pricing, they still act as if the customers are doing us a favor. I drill it into their heads that the customer is doing us a favor. And we"ve also brought in new business by explaining how we came to the final bid. If a job is overly complex/labor intensive, its OK to explain why. Since he"s left, we are closing 50-75% of people in any given day, just by presenting the features and benefits.
3- Our business from Internet business continues to grow.
So we"ll have to agree to disagree. There are so many areas we can improve in, that we are dictating what our results are. The overall business environment is one thing, but the fact that our referrals are increasing (through getting the job done right), our close rates are up about 25% and Internet business has increased us 20% are direct results of making changes. At this rate, for January 2009, I think that we"ll end up doing 50-100% better than last January.
I am a firm believer in controlling one"s destiny, rather than sit around and be a victim. And in this case, the business isn"t running at peak performance, there are still other ways we can improve.
Shonuff
Mr. Poopybutthole
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So things slowed down quite a bit in December and for all but the last week of January. We weren"t clearing ten calls a week from customers on estimates. I lost alot of sleep worrying about the crews and if they were getting enough hours to make ends meet. Towards the end of January, calls started picking up tremendously, and we did 20k of work the last three days of January. February got off to a great start, and we"ve already make 30K. With 56K of work scheduled, I expect to make at least 60K this month! We"ve had to higher three more guys and add a crew. Really the only thing that has changed is that while our wealthy customers get work done all the time, once Christmas was over, the upper middle class and middle class people started coming back. We are up over 2008 numbers by 30% already.
I called the seller, and asked him what was up. He basically said that with the type of landscaping that we do, the business can turn in a minute. And this is what has happened. The Monday of the last week in January, we had $1300 of work scheduled. By the end of the week, we had 30K of work scheduled. This really is alot different than working for someone else.
So a running total of how I have done since taking over the business is:
Nov: 25-30K profit
Dec: -9K loss
Jan: 11K profit
Feb: estimated 60-70K (30K profit made, with another 56K of work scheduled)
One thing I am noticeaing about the landscaping business is that it can be extremely volatile. One month, you just pay the bills, and the next month you make 50K. This is unlike any business I worked for. For the two corporations I worked for, you could forecast sales and income for a given month just looking at sales history for five years, and be accurate within a few %. For landscaping, it seems like you either lose money in December and January, break even a few months, or make a killing. It makes it really hard to schedule stuff and plan out your resources.
The laborers are working hard. Instead of taking the typical American worker"s mentality that they need to slow down and milk the employer for hours, they realize we need to get the business. They are working about 70 hours a week right now. I let them know that when it slows down, they"ll be taken care of. Pretty much for seven weeks in a row (in December and January), I added 10-12 hours a week to their check, and I told them they"d take care of me when business picked up. We have a pretty good relationship and realize that we can"t do it without being a team.
I am concerned they are working too hard - 70 hours a week of manual labor is tough on anyone. I put it up to a vote as to whether they would still work Saturdays, and they told me that they realize that if they don"t get to customers within two weeks, someone else will. These guys actually care about how the business is doing, and not just their paychecks. This is a big difference to me, as someone who worked for a company that employed the UAW.
I am tripping a little bit that for the first two months of 2009, I will make about 80K net profit. But I bought this business after doing my research on this niche in landscaping that said it was recession proof. And so far, last year, sales were up 20%, and this year, are up more than 30%. Not all businesses feel the pinch in recession - some actually do better in recession.
I called the seller, and asked him what was up. He basically said that with the type of landscaping that we do, the business can turn in a minute. And this is what has happened. The Monday of the last week in January, we had $1300 of work scheduled. By the end of the week, we had 30K of work scheduled. This really is alot different than working for someone else.
So a running total of how I have done since taking over the business is:
Nov: 25-30K profit
Dec: -9K loss
Jan: 11K profit
Feb: estimated 60-70K (30K profit made, with another 56K of work scheduled)
One thing I am noticeaing about the landscaping business is that it can be extremely volatile. One month, you just pay the bills, and the next month you make 50K. This is unlike any business I worked for. For the two corporations I worked for, you could forecast sales and income for a given month just looking at sales history for five years, and be accurate within a few %. For landscaping, it seems like you either lose money in December and January, break even a few months, or make a killing. It makes it really hard to schedule stuff and plan out your resources.
The laborers are working hard. Instead of taking the typical American worker"s mentality that they need to slow down and milk the employer for hours, they realize we need to get the business. They are working about 70 hours a week right now. I let them know that when it slows down, they"ll be taken care of. Pretty much for seven weeks in a row (in December and January), I added 10-12 hours a week to their check, and I told them they"d take care of me when business picked up. We have a pretty good relationship and realize that we can"t do it without being a team.
I am concerned they are working too hard - 70 hours a week of manual labor is tough on anyone. I put it up to a vote as to whether they would still work Saturdays, and they told me that they realize that if they don"t get to customers within two weeks, someone else will. These guys actually care about how the business is doing, and not just their paychecks. This is a big difference to me, as someone who worked for a company that employed the UAW.
I am tripping a little bit that for the first two months of 2009, I will make about 80K net profit. But I bought this business after doing my research on this niche in landscaping that said it was recession proof. And so far, last year, sales were up 20%, and this year, are up more than 30%. Not all businesses feel the pinch in recession - some actually do better in recession.
Shonuff
Mr. Poopybutthole
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This is the entry that I pulled from wikipedia last year when I was looking for recession proof businesses. My wife worked for Careerbuilder, and they sent this post to everyone in the company. They were told to target these types of businesses and to try to sell them job postings/HR services, since these companies still go pretty strong in recession. It helped me make the decision on buying business that I did, as we fall in the category home renovation/improvement. People want their property to look right, and a properly landscaped yard can get a 20% higher sale value. So when real estate is dominated by buyers, sellers are more apt to spend $$$ with us to try to sell their house.
Here is a blurb from the email. I am not sure I agree with all of these. Any other business I look at is going to be a defensive play, it won"t be the type of business that is easily swayed by discretionary income.
"Recession-proof industries
Some industries are considered by economists as recession-proof industries. Goods and services produced by theses industries have a low income elasticity of demand and thus business involving these goods remains relatively stable despite the fall in discretionary income that occurs during an economic recession. These industries are in contrast to those that produce high priced durable goods and luxury goods such as automobiles and jewelery. Most recession proof industries produce soft goods which are necessities. Corporations historically associated recession-proof industries have included Kraft, Procter & Gamble, and Gillette.
The reason these types of companies are often called recession-proof is because they produce and sell products that consumers use regardless of their economic status or level of income. Men and women need to shave no matter what happens in the economy, families need to wash their clothes and feed their children.
The following is a non-definitive list of recession-proof industries:
Medical Services / Health care
Pharmaceuticals
Necessities: food/grocery stores/chains
Cosmetics
Education[1]
Entertainment
Home & vehicle repair & maintenance
Home renovation / improvement
Debt collection
Tax preparation / simplification
Career/Job search/Life coaching
Energy
Electric
Oil
gas
Security/Alarm services companies
Weapons industry
Vices
tobacco
liquor
Adult related entertainment"
Here is a blurb from the email. I am not sure I agree with all of these. Any other business I look at is going to be a defensive play, it won"t be the type of business that is easily swayed by discretionary income.
"Recession-proof industries
Some industries are considered by economists as recession-proof industries. Goods and services produced by theses industries have a low income elasticity of demand and thus business involving these goods remains relatively stable despite the fall in discretionary income that occurs during an economic recession. These industries are in contrast to those that produce high priced durable goods and luxury goods such as automobiles and jewelery. Most recession proof industries produce soft goods which are necessities. Corporations historically associated recession-proof industries have included Kraft, Procter & Gamble, and Gillette.
The reason these types of companies are often called recession-proof is because they produce and sell products that consumers use regardless of their economic status or level of income. Men and women need to shave no matter what happens in the economy, families need to wash their clothes and feed their children.
The following is a non-definitive list of recession-proof industries:
Medical Services / Health care
Pharmaceuticals
Necessities: food/grocery stores/chains
Cosmetics
Education[1]
Entertainment
Home & vehicle repair & maintenance
Home renovation / improvement
Debt collection
Tax preparation / simplification
Career/Job search/Life coaching
Energy
Electric
Oil
gas
Security/Alarm services companies
Weapons industry
Vices
tobacco
liquor
Adult related entertainment"
Even the super rich use investors bro. In fact, being super rich gives you more pull.Tuco said:
I worked for an "acquisition hungry" boss who did the same kind of shit.Lyrical said:
These guys buy businesses because it makes them look business savvy.
It"s mildly amusing to me seeing shit that I learned in signal processing and quantum mechanics has a different name in finance (we call it correlation). Statistics is ridiculously useful in so many areas.Lyrical said:
Very interesting thread, by the way. I gobbled it up even though I have no real ambition to own my own business.