Am I ready to buy out the company I work for? 4

[Sparweb]

Hi

I have worked for the same consultant for over 10 years, and we still work well together. Now he's retiring, and offered the company to me. This offer follows several events, good and bad. Firstly, I got my mortgage paid off last week, so I'm suddenly debt-free. Not a lot of savings, but a year's salary give or take. I'm pretty young for this stage in life, and I have my wife to credit too (for having a higher salary than me all these years).

The other important event is a rather big screw-up, my fault, and the boss crucified me for it (the same boss making me the offer) and then he figured out how to put it aright for me. I've had a couple of recent mistakes like this one, so I'm very confused as to where I really stand. It shake my confidence in my own decisions, and yet here's the business offer, still on the table.

Since the boss will retire no matter what I do, I may be out looking for work sooner or later. I can take on the business, which is not just consulting, but sells a profitable product that pulls in 400k. Two other full-time employees and a part-timer make that happen. I've always been more concerned with the consulting side, but I'm proud to be the one who designed this major product in the first place. Company goodwill is still strong because the clients who buy the product need the consulting service, too. I could easily value the company above 400k. Borrowing is difficult in the US, but here in Canada, I could borrow the money, and buy him out next week.

Problem is, I've been soul-searching... why have I been making mistakes lately? I think back to what I was taught in college, and what the old boss has shown me along the way. There's no reason for me to have screwed up the things I did, if I had just taken charge of my situation, and the client's, more professionally than I did. I have this pretty plaque on the wall now, but I don't think I'm living up to it.

Everybody screws up from time to time, but I'm about to shed the one guy who will go to bat for me when I do!

Does this sound like anyone else's experience?
Am I just letting the nerves get the better of me, or does it sound like I'm not ready for the big step?


PS - If I set up my own practice, then whoever buys my boss' company would kick my a**.

PPS- If I get a job at another company, it will probably be in another city, meaning my wife would have to choose if she should leave her job. Which pays more. Probabaly more than any future job I could get.


Steve


STF

 

[SLTA]

Steve, go tell all this to your retiring boss and ask him honestly what he thinks your screw-ups are due to and why he wants you to own his company. You have little to lose and tons to gain. His thoughts may lead to attitude/professional changes on your part, but in the long run, it will be good.

I started my own firm when I was let go and had no interest in fighting to get another job that would give me the flexibility I need. Other than a few bumps, it's been lovely.

Best of luck with your decision.

 

[patprimmer]

Would your old boss be prepared to say come in 2 days a week to guide you through all aspects of the business for say the next year. There are probably things you don't know about the management and production side.

A customer list is a very volatile thing and customers can quickly evaporate with a change of management.

You say the production aspect brings in $400,000 per year. Is that profit or turnover. If profit is it net or gross and if net, how are overheads counted.

When your boss goes that will leaver you one man down. Have you thought of a replacement.



Regards
Pat
See FAQ731-376 for tips on use of eng-tips by professional engineers &

http://eng-tips.com/market.cfm

for site rules

 

[Ron]

Good advice from Pat and slta....

I appears that your confidence has taken a nose-dive. Your boss, who has many years on you and has apparently bailed you out on several occasions, sees past your flat spots and has more confidence in you than you have in yourself. That means a lot. He didn't start and build a successful business by being wrong about people. Now he is ready to turn over something near and dear to him....his reputation....to you, with the confidence that you will further that reputation and build on it. Take him at his word.

Do exactly as slta and Pat have suggested. You won't find any better advice in my opinion.

 

[Sparweb]

Thanks guys,

@Pat, If I'm the New Owner, then the guy I have to replace is me! I won't have time for the general consulting projects that I normally do; instead I'll be managing, bookkeeping, marketing, etc myself. If the old boss does come in for a few days a week, he'll probably want to do my consulting job! How ironic!

Keeping him around would prevent the clients from heading for the exits, and for figuring out what the heck happened on such-and-such an occasion. It's probably the best thing to do; making sure he can stay involved. How else would I get access to an expert and only pay him part-time?

@Slta and Ron, thanks a lot for the support. Usually I go around convinced that I'm the smartest SOB in the world, so I'm not used to this self-doubt crap. It's awful. One step opening up about it on the forum will help with more steps talking to some friends about what it means.

You guys are great. I'm glad I'm a member here.

STF

 

[SLTA]

Should I do the one about *I'm not a guy* this time, or let it rest?

Steve, I tell you what. Sometimes getting your confidence knocked down a few levels is the best thing for you - it's a chance to honestly reevaluate, make changes where needed, and come back stronger then ever. Just don't be a jerk and you'll be fine.

I love Pat's idea of having your boss help with the transition.

 

[patprimmer]

Linnea.

Surely you are one of the guys here. In this sense guys is gender neutral as it is about status and acceptance. Do we have to keep inventing new badly fitting words and expressions instead of just adjusting meanings of good expressions that just roll off the tongue.

If I was in a traditional female thing, like cooking classes (remember I am now a full time carer for my mother) I would readily accept being one of the girls. I must reinforce that I am in no way gay or sissy. It's just what terminology fits the situation.

Regards
Pat
See FAQ731-376 for tips on use of eng-tips by professional engineers &

http://eng-tips.com/market.cfm

for site rules

 

[Sparweb]

Slta,
Haha you got me on that one. I have seen your posts but I guess I've missed the ones where this subject came up. Is a web forum like this one, a place where these things just don't matter much, when discussing professional matters?
I grew up in Quebec, where there are NO gender-neutral nouns or pronouns in french.

There have been a few other things upsetting my confidence, things like regulatory hurdles that I do not relish. I don't look forward to seeking more of them as a company owner. I'm starting so see them in proportion to the bigger picture; maybe not so daunting as they were before.



STF

 

[MacGyverS2000]

Maybe I'm looking at it from the wrong side, but...

If I have to ask a bunch of near-strangers if I'm ready to buy out a business... I'm probably not. If I can't determine why I made certain major mistakes, I'm probably not ready to own a business.

Mistakes happen, confidence can be shaken... but you have to resolve these issues before taking on an entire business. Cold hard facts, sorry if it bums you out.

Dan - Owner

http://www.Hi-TecDesigns.com

 

[SLTA]

Believe me, that one was very tongue-in-cheek. The ones that annoy me are "dear gentlemen", but that's a whole other thread. Pat, cheers, I'll be one of the guys. You go take that cooking class.

My business is pretty simple - I pay my taxes, insurance, fees on my license and fees on my company, and that's pretty much it. No employees so that's definitely simpler. Luckily, I somewhat enjoy the administrative side (except when I'm fighting to get paid...).

 

[jmw]

Sounds like in any other circumstances you'd jump at this but the screw ups are what hold you back. It may also be that you don't like the thought of doing some of the things the boss does because you simply don't know what he does with the rest of his day or if you do, don't think you can do them.

If your boss wants to pass the ownership over to you then obviously he has confidence in you. He isn't just looking for a payout and then is happy to let you run it into the ground.
It may be that the boss sees some of your problem being simply a loss of focus and maybe he feels that when you are the owner, this would restore your focus and sharpness.

Some good suggestions above about having the boss retain some kind off involvement on a temporary basis or as an occasional consultant.
There are downsides to this but in these circumstances the upsides maybe more than outweigh them. A well used transitional period is one major benefit (and for him too.... a sudden change to retiree is also a culture shock).

The important first stage is to take over the management of the company as it is now and run it as it is now until you are comfortable. Unless there is some compelling reason why the company has to change, it would be a mistake to try and make any "new broom" changes at the start. This takes away one of the strains of the old boss having an ongoing role because he is by nature going to represent a check on change. That means you can both focus on sorting stuff into buckets:

When you say that it is you that has to be replaced because you are going to replace him, that isn't entirely right. In fact it is probably the worst possible view.

We all of us make our own shape in the water. How many people here actually do the job they were hired to do exactly as written?
Probably none.
To some extent we all of us create the jobs we do simply by doing the bit we do well more than the bits we don't do so well and some one else picking up some of your weak areas where they are strong and hopefully a sort of quid pro quo goes on and you bring some strengths where others have weaknesses.

So the boss retiring doesn't mean you have to become a clone of the boss nor that you need a clone for you.
Impossible anyway.
Nor will the company continue to operate exactly the same as before nor should it. It has to respond to changing market conditions, to opportunities. It will also have to reflect the skills and abilities of the employees.

Hence you need to sort stuff into buckets.
You start with the two buckets which represent in one what he does now and the other what you do now.

Then you need an "owner's bucket"
The first thing in here are all the things the owner has to do.
Then you put in here the things you want to do and are capable of doing from your job now and his job now. Some of this stuff you won't have time to do and it too will go into the next bucket after a time.
This is a new employee(s) bucket.
The new employee bucket is where you put together a lot of things that go together and will define a new employee. Or employees or new employee plus bits shared with existing employees.

You won't know till you sort through everything what you need.
It will help you to get to know something about what the other employees are capable of, not simply what they currently do.



One thing you may want to look at is how you got too deep in the mud on a couple of projects it took a major rescue operation. Mistakes are often easier found by a second set of eyes on an ongoing basis.

JMW

http://www.ViscoAnalyser.com

 

[casseopeia]

Before you commit SparWeb, get at least two professional company valuations. There are a number of ways to value a consulting firm. My experience is that it's somewhere around 2 to 3 times one year gross receipts plus inventory minus obligations. With the valuation, you can then look at future income factoring in a degree of bad debt and erosion of client base.

Stress can cause bad decisions and loss of confidence. Look at your personal stressors and see if you can reduce it. Consider doing things like increasing aerobic exercise, yoga, and improving diet.

"Gorgeous hair is the best revenge." Ivana Trump

 

[Sparweb]

MacGyver: Well said! I bet you don't like navel-gazing either.
You guys aren't the only people I'm talking to about this, but I've been a member of ET for nearly 10 years, so it felt natural to ask for additional sources of experience and ideas. What's wrong with baring one's soul to the cold hard internet anyway?

JMW: thanks for sharing so many thoughts about it.
I didn't mean "replace me" quite so literally, but since you took it that way, I appreciate the thought you gave to the reply. Any reduction in the manpower, at the top or the bottom, will affect the service and prodution of the company. Nobody here has a job description cast in stone. There are opportunities available to find people to fill the voids, and I expect that to be necessary.


STF

 

[cvg]

and find out if your boss will finance the buy out. don't get a bank involved if you don't need to.

 

[MiketheEngineer]

The best thing I EVER did was hire people who were smarter than me and in my humble opinion - there aren't too many, BUT they saved my ASS a few times.

Think that over.!!

 

[patprimmer]

If your boss is prepared to finance it, it reinforces his opinion of your ability is sincere and it increases the chance that he will indeed be very supportive after you take over.

Regards
Pat
See FAQ731-376 for tips on use of eng-tips by professional engineers &

http://eng-tips.com/market.cfm

for site rules

 

[StevenHPerry]

If you do decide to go forward, get some good business advice. Here's some bad (i.e. free) business advice:

1. Get whatever agreement you make in writing. Sure, it's Canada. Sure, you worked side-by-side with this guy for 10 years. Sure, he says he wants to retire and wash his hands. But get it in writing.

2. If the old owner stays around in any capacity, have a transition plan (IN WRITING). Set the boundaries clearly. I heard of a few retirements/buyouts that have stalled part way through because the outgoing owner realized he doesn't like retirement.

3. Even if you kept the books, still have an independent financial-type go over the books again. Set valuation appropriately, without undue attachment to the widget you designed. (Consider buying out the IP of that widget separate from the company?)

4. Consider financing the buyout using only the profits from the business AFTER paying yourself a salary. This gives you assurance that you're not buying an unprofitable business. If the previous owner balks, there's a red flag that the cash flow isn't there.

5. Try to keep it civil through all the above. The guy had to love his company. He will want you to succeed. He will probably help you to succeed, whether that's as an employee, consultant, or just being a personal mentor. Protect yourself with the contracts in writing, but also protect your friendship.

6. I have no personal experience with this particular program, but I can vouch for the soundness of his advice on personal matters:

http://www.daveramsey.com/entreleadership

- Steve Perry

http://www.linkedin.com/in/stevenhperry

This post is designed to provide accurate and authoritative information in regard to the subject matter covered. It is offered with the understanding that the author is not engaged in rendering engineering or other professional service. If you need help, get help, and PAY FOR IT.

 

[patprimmer]

A written contract, not only serves to reduce the risk of fraud, it serves as a memory jogger even among friends. Intents do change and memory is fickle and selective.

The worst scoundrels present as the most charming agreeable people until your in a position where they can take you to the cleaners.

Regards
Pat
See FAQ731-376 for tips on use of eng-tips by professional engineers &

http://eng-tips.com/market.cfm

for site rules

 

[thruthefence]

Something I haven't seen mention of, is the future revenue stream potential of "a profitable product that pulls in 400k" a year.

Is it something you are pretty sure you can count on as you take over running of the business?

 

[Sparweb]

I really appreciate everyone's input. I think I started this thread in a low frame of mind, and that's been cleared up now. With this perspective, and time to consider how it happened, it actually reinforces thoughts I've had for a long time about how "good practices" should be reinforced, and how the company should move forward, in a way that encourages us to improve the way we work. That can be improved during a transition; in fact it can be improved BY the transition itself, because it shakes up the old roles and opens seats for new fresh minds, too.

STF