Ok, let's test your business acumen guys, help someone out with a real life situation

[chrisncate]

Ok capitalists, here is a chance to test your skill in a real life situation where your insight and/or advice might make a real difference to someone in business - not just arguing theory on a forum. He's tried to solve a problem regarding his business and has come up with zilch. Here's the story:

I know a guy who has a nice little one man operation that does very well for a sole proprietorship. It's a perfect business for one person - you can work when you want (sky's the limit, you can do part time all the way up to 24 hours a day if you want), the market it exists in is always on as the service is in demand. I's been up and running for years and has a great rep locally. It has a good website that is first in a relevant search, and generates cold call business daily in addition to issued work orders by the manufacturers it handles and revolving commercial accounts.

The problem:

1- There is no brick and mortar business, it runs out of a home office, a laptop and a tool bag basically. Nothing tangible to show. Great for overhead, bad when trying to sell.

2- He can't figure out how to show it to anyone interested, as he'd be training his replacement/competition he believes. He can't get involved with trying to enforce a confidentiality agreement, non compete agreement, etc due to life circumstances. If he had an interested party and they "cheated" on a non disclosure/confidentiality agreement, he just wouldn't have the time, resources or will to do the fight he'd need to do. Same goes for dropping coin on a decent lawyer for retainer, it's not currently a viable option for the guy.

3- He hasn't done this past year what he's done in years past, due to other things going on and a soon to be life change coming up. Customers don't perceive this on their end at all (due to the nature of the business), but it's hard to try to explain this in a sale situation for the obvious reasons. Brokers don't like this sort of circumstance it appears.

4- Anybody with enough money to buy probably doesn't want to turn the wrenches themselves or even buy something that doesn't do a million (or ten) a year. Anybody who does want to turn the wrenches and run a one man show probably doesn't have the money to buy, especially right now. Catch 22.

5- He doesn't want to just close up shop, but it's looking that way unless someone comes up with a genius idea that he hasn't thought of. He had considered giving it away for a quarter of a typical years gross, which is like giving sit away. He'd even considered placing a classified ad on a sailing forum looking to trade a boat for the business. Crazy, but better than just closing iho.

If anyone has any advice for the guy, I'd pass it along to him and see what happens. If any of you have a solution for a seemingly insolvable business problem that he hasn't thought of, he'd be amazed and in your debt, this I am sure of.

Any ideas guys? I know I'm stumped and can't help him... he'll probably just have to close it up it seems.

[aeventyr60]

If the business has any real value and is a profitable enterprise, then a professional "business valuation" company can do a pretty accurate estimate of it's value and list it on the open market. Problem with the one man band type operations is that the value is often in "goodwill" which the owners think has great value, and the free market thinks less. Let the market decide....

[chrisncate]

Originally Posted by aeventyr60

If the business has any real value and is a profitable enterprise, then a professional "business valuation" company can do a pretty accurate estimate of it's value and list it on the open market. Problem with the one man band type operations is that the value is often in "goodwill" which the owners think has great value, and the free market thinks less. Let the market decide....

This business isn't something that the corporate money/business valuation types/brokers would even bother putting an effort into (even though it does what's often considered a good salary), due to the fact that it's small potatoes in the scheme of investment or even an outright sales of businesses (plus the reasons listed in the op). Brokers charge a lot, and paying out isn't viable right now.

This is a business that repairs tangible things out in the real world for real people, like an old fashioned business. It doesn't perpetually expand, although it probably could (the owner was happy with where it was, and ran it accordingly - without the mindset of constant expansion and endless growth - a large negative to the broker/valuation folks).

[JedNeck]

Ask anyone selling a boat right now...it's worth what someone will pay.

My advise is to find a young unemployed guy with some craft skill and hire him to do the hands on. Your buddy can run the overhead. Just don't give the guy the suppliers/mfgs numbers or the client list.

There are more people out there that want to do their work and just go home at the end of the day than there are that want to run a biz.

Personally I would love a cut of six figures to go work on boats.

[aeventyr60]

Originally Posted by chrisncate

This business isn't something that the corporate money business valuation types would even bother looking at or placing a value on (even though it does what's considered a good salary), due to a myriad of reasons. This is a business that repairs tangible things out in the real world for real people, like an old fashioned business. It doesn't perpetually expand, although it could (the owner was happy with where it was, and ran it accordingly - without the mindset of constant expansion and endless growth - a big no no to the valuation types).

Hence the dead end. Seems like there is something wrong when you can't give away business away that does very well, all because of the capitalist religion of how things are "supposed" to be run in this era we now find ourselves in.

Plenty of small business valuers out there, also small business owners. List it on craigslist. Gotta start somewhere...Give it a value and see what happens. If it can't sell then to bad, he can move on to something else. Like I said the market will decide, money talks and bullsheeet walks.....

[chrisncate]

I don't think you're getting it though, it's not a market deciding on what it's worth issue, it's a "can't really show it without training a competitor" issue, as well as the catch 22 noted in #4 of the op.

[jackdale]

My financial adviser told me once that you should not buy good will.

In this case what you are buying is a customer data base. Can you guarantee that customer base will follow the new owner? Does he have a trade secret that is part of the deal?

Things are worth what people will pay for them.

[aeventyr60]

Originally Posted by chrisncate

I don't think you're getting it though, it's not a market deciding on what it's worth issue, it's a "can't really show it without training a competitor" issue, as well as the catch 22 noted in #4 of the op.

It's not business theory we're talking about here ("free markets" and "money talks" platitudes that don't really mean anything), but rather the real world and this particular real world business situation, you know what I mean?

Well acquainted with the real world. Think you and your buddy might be having trouble with reality. Sounds like a bunch of BS anyway...Either it has value or doesn't.

Just like our boats, we all think they are worth X+, time to sell and it is a different story.

If the market can't place a value on it who will? Get real.

Sounds like more of your namby, pamby, panty waste arguments again.

[chrisncate]

Originally Posted by jackdale

My financial adviser told me once that you should not buy good will.

In this case what you are buying is a customer data base. Can you guarantee that customer base will follow the new owner? Does he have a trade secret that is part of the deal?

Things are worth what people will pay for them.

Well, it's a bit more than a customer database, but you're basically right. To note, it's not a business that relies on past customers at all (the residential component). While the referrals are appreciated, it's new business typically on each call.

As for guarantees, what gets passed along is a self sustaining business, plus all of the hardware, tools and system that he has developed over the years that has proven itself pretty successful. There are no sales and/or marketing involved, the business rolls in on it's own and even then it's hard to keep up with, and work even gets turned away sometimes, I'm told.

[jackdale]

Chris

I decided not to quote.

Another business concept I learned was succession planning. I was a part of a partnership in sailing company, we were always on the lookout for partners. The irony is that one partner bought the rest of us out. Not good move, in my mind.

It is hard to sell a sole proprietorship. I have one that I will never sell, I will just let it dissolve as it is based on my good will and my expertise. Your buddy might think about bringing in a partner who, after learning business, could buy him out.