Adventures with Lyrical: Buying a Business (REPOST)

So, it's dawned on me that it won't take that much more money to be completely debt free in this bitch by December 2017. I could write a big check now, but don't want to hurt working capital in the least. I like to have three months' cash for operations on hand at all times, in case of a recession.

So we are in the home stretch, and then I'll have approximately 17k a month I can spend on myself, without touching company profits. And I'm fine with that. We've reinvested and taken very little out over the years. We had to kill our 401K to come up with the down payment on a business purchase of this magnitude. We are going to get this sucker paid off, and then start bulking up the kids' college accounts and our new 401K. And we won't need a bank to finance any more equipment purchases, we'll be our own bank.

When you buy a business, you have no idea how long it will take to pay it off. Ten years seems like an eternity. And the bank doesn't give you a break when you slow down.

Thanks guys. There have been some tough times (around the Great Recession). There have been times when customers owed me over $100,000, with only 13k sitting in the bank. There have been times when I should have laid off employees for non-performance much earlier than I did. I attach myself too easily to employees, and once I do, I tend to cover up their faults. I put up with Estimators pricing stuff too low for years. I just let a guy go after 45 days, because he wasn't covering my labor costs on some jobs. He was bidding $3,500 jobs for 1,000. You get some leeway when you hire on, but when you keep pricing jobs that take multiple crews a solid day, and only charge the customer three hours, you've go to go.

If I could go back and change things, I'd have my business and house paid off already, and another 500k on hand. I didn't know how to manage the slow times. We used to just sit there and starve, living off savings for the year. We'd work one day a week, like everyone else, in the Winter. I think some of you might remember when I was thinking about selling firewood in the Winter, because there was no work? That's all changed. We haven't missed a day of work in five years, other than to inclement weather. When I added the first billboard, we saw a 10% increase in sales. The same with the second. Radio was added, and brought about a 6% increase. Newspaper brought about 3-4%. Google helped. And then when we went to TV, everyone in the area knew who we were.

I remember one Winter, we lost 100k between Dec-Jan-Feb-Mar. Now we hover at break-even in the slow times. I've made $60k net in a month in the business, and I've lost 25k in a month in the business. And that was all because of not managing demand (marketing).

If there was a business slow down, it was because I didn't have my hands on the ship (I had Managers). Now I manage and estimate, and profit is where it should be. Will I ever be able to run more businesses? I don't know, I can't get Managers to think like I do. They think too small, and that guides everything they do. I pay them more than they can get anywhere else. But they still take the path of least resistance.

When shit hit the fan, it required "out of the box" thinking. None of my competitors have followed me in advertising, so that's weird. So they sit at home starving right now. It's right before Christmas, and I'm booked three of the four weeks in January already.

Second best December in 15 years. It would have been number one, but I spent a couple of thousand on a direct mailer.

I had my wife look at the months, and our worst December was a loss of $57k. So I'll take break even. December is the worst month in our industry; companies go bankrupt in December and January.

I know someone will ask what changed, so I'll answer now. The previous owner spent maybe $1,500 a month in advertising. Last month I spent about 15k. When we slow down, I advertise more. Most business owners save their money in slow times, but I've found its best to advertise a lot more when that happens. So instead of losing 20-30k in a given month, I lose 5k a month at most now, because of the higher demand. Even now, I'm cherrypicking jobs that only pay me full price. When we didn't have as many ups, we took deals 25% lower than normal. At times, I had Estimators freak out and sell jobs below their cost. That's a good way to go out business, when you keep going out losing money every day. If it's not a Church, or a widow, I'm not discounting a penny.

a_skeleton_03 said:

I love this line the best! So true, people think because it isn't a busy month you will take whatever scraps they feed you. That is when you need full price the most!!

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Everyone wants the lowest price for what they buy. I ran an estimate yesterday for $830, and the guy wanted to pay me 350. My labor on the job would have been 330. 20 dollars is the only contribution margin I would have gotten. My overhead on the job would have been substantially more than the 20.

When people ask how business is, they are doing it to see if they can rape you. Even if we have no work, the answer is business is good. If you say it's bad or mediocre, they want at least a 25% discount. And some of them will ask you to do it for free. "You don't have anything else to do, so why not do this job for free?," is what they say.

Big_w_powah said:

Shonuff is the Mexican overlord; He runs a landscaping business.

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Not lawn mowing.

consensus said:

people are parasites. you learn that quickly once you work sales.

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I just told a big construction company they could go fuck themselves (nicely). I bid the contract at $11k, and they came back to me wanting 1,800 off. Everything is based on straight time, the hourly rate is set by the licensing groups. In one of the areas, it is a high traffic area with a lot of legal exposure. I charged 3,200 for that, the previous owner would have charged 4k+.

We'll see what they do. Sometimes you have to walk away. 1/3 of my sales close after I've left the property. They want to see if you'll flinch. I don't anymore, because I've had eight years to understand my cost structure. It's easy to price jobs so low, and not realize you are losing money until 60 days later. Heavy equipment needs to be repaired and it isn't cheap. It's all good until something breaks and the bill is 3k.

Shonuff said:

I just told a big construction company they could go fuck themselves (nicely). I bid the contract at $11k, and they came back to me wanting 1,800 off. Everything is based on straight time, the hourly rate is set by the licensing groups. In one of the areas, it is a high traffic area with a lot of legal exposure. I charged 3,200 for that, the previous owner would have charged 4k+.

We'll see what they do. Sometimes you have to walk away. 1/3 of my sales close after I've left the property. They want to see if you'll flinch. I don't anymore, because I've had eight years to understand my cost structure. It's easy to price jobs so low, and not realize you are losing money until 60 days later. Heavy equipment needs to be repaired and it isn't cheap. It's all good until something breaks and the bill is 3k.

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The construction company accepted my terms, after getting other bids. So I was competitive. I know the other companies' cost structures, and to do a complicated job like this requires every certification and insurance policy in the world. You also need to have a ton of equipment. It costs money to do all that. You can't flinch when a large customer says they want a better price, and are going to get other bids. I bid this to make a fair profit margin, but not a huge one. I always bid as if they have called three other companies.

I LOL when companies demand to see my financials. A business rule is if they say they want to see your financials to help you be more efficient, they really want to see how much money they can take from you. We do work for corporations where they try this crap. I tell them they can find someone else if that is a must. Then they sign the contract. It's all one big poker game. NEVER release your financials to anyone but the IRS or your banker. I don't care how big the contract is they are offering. I've turned down some big ones.

Echuta said:

Quick question: I just applied for my LLC and I'm in the market for a business credit card. Any particular ones that you would recommend? Annual expenditures will probably be 5-7 K in the first year.

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I hate to say it, but my crews use a personal credit card. We bought back in the mortgage meltdown. It used to be pretty hard to get a credit card back then. We've forgotten to get a new one, now that things have changed.