Is it easier to buy out an existing company, or start own?
Is it easier to buy out an existing company, or start own?
(OP)
There are a few of us who are ready, willing and potentially able (financially etc.) to venture out on our own. We can start a business from scratch (with some clients we have) however another option is available.
There's an existing company - a 3 man team, with the original owner who's in his late 60s and potentially interested in retiring soon. We can approach him and essentially join him/buy him out.
The benefits I see with this are
1) his company is established so less paperwork & admin, not to mention equipment & infrastructure
2) we gain his client lists along with our potential clients
3) we automatically have a "name"
4) he has two existing employees.
The downsides I see are
1) costs are higher since we eventually have to pay for whatever his company is valued at. This means we can't start in our "garage" to minimize costs.
2) whatever "reputation" his company has - we inherit (both positive & negative)
3) he has 2 existing employees :)
4) we will never really be a "new" company in some of our guy's eyes i.e. we didn't start it from scratch.
So, for others who have ever faced this decision, how did you decide?
This is very preliminary. We haven't approached the other company yet so it may all be moot if he decides he doesn't want to sell/partner or his price is out to lunch.
I just want to hear some thoughts.
There's an existing company - a 3 man team, with the original owner who's in his late 60s and potentially interested in retiring soon. We can approach him and essentially join him/buy him out.
The benefits I see with this are
1) his company is established so less paperwork & admin, not to mention equipment & infrastructure
2) we gain his client lists along with our potential clients
3) we automatically have a "name"
4) he has two existing employees.
The downsides I see are
1) costs are higher since we eventually have to pay for whatever his company is valued at. This means we can't start in our "garage" to minimize costs.
2) whatever "reputation" his company has - we inherit (both positive & negative)
3) he has 2 existing employees :)
4) we will never really be a "new" company in some of our guy's eyes i.e. we didn't start it from scratch.
So, for others who have ever faced this decision, how did you decide?
This is very preliminary. We haven't approached the other company yet so it may all be moot if he decides he doesn't want to sell/partner or his price is out to lunch.
I just want to hear some thoughts.
-
Syl.
www.aercoustics.com
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RE: Is it easier to buy out an existing company, or start own?
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RE: Is it easier to buy out an existing company, or start own?
Peter Stockhausen
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Infotech Aerospace Services
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RE: Is it easier to buy out an existing company, or start own?
RE: Is it easier to buy out an existing company, or start own?
1. get a very good lawyer & accountant
2. make sure you know who his customers are before you buy him
start asking around about his reputation (that's the only thing you have at the end of each day).....
3. don't be afraid to make changes in the way he's operating
4. keep him on retainer / use part of the buyout money to make sure he's part of the operations for a period of time. make sure you and he do the "meet & greet" of EVERY customer.
5. are you buying payables and receivables? is this a stock purchase?
RE: Is it easier to buy out an existing company, or start own?
Also what happens to liability for current or past work?
Cheers
Greg Locock
New here? Try reading these, they might help FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm?
RE: Is it easier to buy out an existing company, or start own?
If he is serious, I would certainly find a way to have him stay on for 5+ yrs, to transition the clients & spread the costs.
The company itself has a decent reputation and been around since early 90s, but since it's always been a small operation (even smaller now), it's definitely not that well known. It's a consulting operation but my field is very niche with not more than 10 players in the province. About 6 major companies (major being >15ppl) and the rest being small 2-4 man teams.
Going the "new" route, it will be "easy" to be stay self-employed, but growing to a self-sustaining level will be incredibly difficult.
RE: Is it easier to buy out an existing company, or start own?
Are you able to float all of the above expenses for 4 months without taking a paycheck? Will you be able to get the insurance needed to work on larger projects your existing clients may give you? How long can you sustain the business until you really start turning profits? 1 year, 2 years, 5 years?