Adventures with Lyrical: Buying a Business (REPOST)

In May, we are on track to do 100k in sales, and if you add back in owner discretionary expenses, make about 40k in profit. So profit margin is roughly 40%.

I can't wait to see what the peak months (June-Sept) will look like. I've started giving raises out, if I lose any key people, that goes kaput. Last June, one of my best workers was offered a 25% raise by a much smaller company. They ran out of work three months later, and he went unemployed for six months after that. I just rehired him. I remind the guys that I haven't laid off in three years now, and that my competitors are revolving doors. I use that guy as an example. The competitors (in their peak months) offer whatever they can to get guys, and lay them off the minute they lose a penny. First sign of trouble, and you are left jobless with them. I'm not going to play that game. I provide year long work. The company down the street provides work five months out of the year, if that.

Tarrant_sl said:

This response isn't meant as a dig, but from past posts I'm betting this will be his response.

"They fact that they are employed year round means they already make more money than anyone else in this industry here. There's no reason for me to even think of doing something like this."

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I shouldn't have to do bonuses. But on the other hand, I'm considering them because my employees are getting all sorts of offers right now. In my industry, the smaller companies are only open May through August. They'll offer my guys $3-4 more an hour, then they'll lay them off the minute they lose money. One of the guys I just rehired back was offered $4 more an hour last year. He worked there for three months, and then went six months without any work at all. They laid him off at the first sign of a loss. He's been working for me again since March. He's already grumbling because I won't match the offers he's getting. I'm not going to play that game. When I hire, it's with the intent of employing someone all year. No one in the area (except for a company that does 100% government work) can say this.

All I can say is that I reevaluating people that I think aren't getting their market value. He just got a raise (and complained about it), and I have a crew leader that I think is getting below market (he hasn't had a raise in awhile). I may just do an across the board raise for all skilled labor for the Summer, so that would help stave off the competition from pawning my guys. I wonder how the non skilled guys will take that? The non skilled guys can be picked up very easily, the skilled guys with five years' experience are tough to replace. I just wonder if the non skilled guys will get pissed and try to raise a ruckus. If they did, the only reason I'd care is that the skilled and non skilled guys all have the same last name. If it was a guy by himself, I'd laugh, because I pay 15% for non skilled than my competitors do (for the yearly pay).

I'm open to any sort of retention plan I can get (up to profit sharing), because for the next three months, my competitors will be in an outright bidding war for skilled guys. Most of my guys have been here ten years, and won't go to a smaller company that won't guarantee them a paycheck. But we've grown, and it's the new guys that were hired in the last twelve months that I'm worried about. I've made it a point to have impromptu meetings, and have asked the guys that have been here awhile why they stay, in front of everyone. They say there's no way in hell they'd leave. They've seen companies try to steal them, and then layoff everyone in September dozens of times over the years. They might not grasp it all, but they realize that we are the only one in our industry that is on TV, billboards and radio, and they know that this means more work for them. They've told the other guys point blank if you leave the company, you are crazy.

So the answer is more carrot + peer pressure.

Obsidian_sl said:

I can't speak for Crossfit in particular, but I have some gym experience. I own 3 gyms that are more in the Planet Fitness type mold and for roughly 12k sq ft buildings, the buildout was roughly $700k each. On top of that, the equipment package was another $700k. I'm sure Crossfit is less than that based on their dearth of equipment, but gym equipment and buildouts are surprisingly expensive.

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Is there any money in the gym business? Every gym I looked at had books that were cooked. They'd show they were making 100k-300k a year per location, but when digging in, I could see they were breaking even at best.

opiate82_sl said:

You could try productivity-based bonuses. My management staff's monthly bonus is based on managing labor and food costs. I also run contests that give the whole crew a chance to increase their pay based on actionable items. For example, if I notice chicken-wing sales are slowing down I'll offer the entire crew a temporary pay bump for the month if they sell X number of wings. Each of those bonuses pay for themselves vs. just straight profit sharing (which in theory *could* pay for itself, but without the actionable items can fall into the trap Celestine outlined above).

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I've done this before. Everyone got a 12% pay bump for the day based on a certain production level. The problem with this is that it became too important. So if a job is taking more time than it should, they were like fuck customer satisfaction, I'm rushing onto the next job. They cut corners. Or, inevitably, when times get slower, we had to drop prices by 10%, and they'd fuss up a storm. In the Winter, we had to price out jobs to cover their wages and overhead, but there was not one ounce of profit left. One Estimator raised prices by 30%, just to guarantee they'd make bonus. The problem was that his close rate went down because people didn't want to pay 30% more.

At my company, some of those bonuses took on a life of their own, and brought about unintended consequences (most of it bad). I'm thinking about just an across the board pay bump for the Summer for skilled workers, and making them sign that they know it ends on the last day of August. Between that and bumping guys that are lower than market, that should get their attention. They know there's only one company in the area that works every day the roads are drivable in my industry.

Eomer_sl said:

Recently they contacted us and asked us to submit our actual financial statements and balance sheets for the past few years. I can understand why that information would be useful to them and their clients, but being that we're a closely held, private, family business my first inclination is "no fucking way". That shit is none of anyone's business, and I can't see any possible reason as to why I'd ever release that information to anyone other than our lawyer or bank (who we don't owe a cent to, but hey, they're a pain that way).

Thoughts?

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Screw that. Somehow, they got access to some of my company's financial data, and posted that online without permission.

Tarrant_sl said:

How's young blood doing?

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Young blood and I separated today. Oh well, he sold at least 500k in service fees over the last year. But he routinely did not follow instructions, and did the opposite of what he was told to do. In the last month, he started coming to work sweaty, fidgety and with his eyes wide open. He was acting really erratic, and it was time for him to go. He broke up with his GF a month ago, and got into the party scene pretty heavy. My Secretary worked in Rehab facilities, and said he was acting like he was on meth. On top of that, customers were calling in asking if I hired him off the street (like he was some sort of homeless person).

I let him think he quit, but I steered him into quitting. It's always better to make people think they are quitting, than to tell them they are fired. From what I've been told, his GF was the one that got him working again and off drugs. With her gone, apparently he's back on them. They lived together for over three years, and he was clean and sober for that long, but no more.

Honestly, my Secretary just told me he looked like below. Truth is, his eyes started looking like this ever since he broke up with his GF.