Has anyone here purchased a business? - Subaru WRX Forum
 
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#1 Old 09-13-2011, 05:27 PM
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Has anyone here purchased a business?

Like the title says, I'm interested in hearing some real life experience from people that have purchased an exisiting business. I'm looking into buying something automotive related, but I'd like to get the feel of everyone's experience, especially if it was their first business.

Since I live in CA I was thinking of starting off small by buying a smog test only station with a technician already in place, and just be the "investor". Smog owners haven't replied to any of my emails so I assume that they see me as competition. I'm trying to get some "real world" knowledge from people actually doing what I'm wanting to get in to. My long term goal is to own a shop that can handle a variety of work load with employee's that love to come to work.

As always, any help is appreciated.
Thanks guys.

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#2 Old 09-13-2011, 05:53 PM
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Not in the same field as you, and I have never bought into an existing buisiness, but have had my own . I did pressure washing, and had contracts with two major armored car services, banks, restaurants, and strip malls. The biggest problem I has was labor. I paid well, by the job, and averaged around $15 per hour, cash, for my one or sometimes two employees. Keeping employees was the hardest, mostly because people are lazy. I even picked them up and brought them home!!. You need to keep up with payroll, taxes, insurance (including workers comp), vendors, repairs, maintainence, rent/building fees and in my case, the E.P.A. regulations for run off water ect.. I wouldnt even want to think about the red tape in California. Personally I would never be just an investor. I want a say how every penny is handled. TRUST NO ONE WITH YOUR MONEY!!! You call the shots. OH YEAH Cover your a$$ and INCORPORATE or LLC to protect yourself. Good luck.

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#3 Old 09-13-2011, 06:51 PM
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Honestly now is a really bad time to try and get into the automotive field...Especially if your looking long term. If you want to invest in something make it more worth while not a performance shop...

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#4 Old 09-13-2011, 09:09 PM
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^^^ ya, to many and a lot go under in a year or two then your in debt up to your eye balls. if you did you'd need something that no one else has or has thought of. then spend $250k to patent it and you might make it.

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#5 Old 09-13-2011, 10:30 PM
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The business's I've looked at that are for sale have been around for 20 plus years. Many of them have several sources of income such as smog (which is mandatory and can be lucrative) towing, alignment, the usual oil/lube, engine overhaul, tires, and service fleet vehicles.
I'm targeting shops that have commercial contracts as well as the other every day stuff...I didn't metion anything about buying a sole performance shop. The performace stuff is what I would add on the side for fun. I've found several that earn low to medium six figures and I'd be able to make my money back within 2 years.

But yes, I have seen several others that have iffy numbers and suspicious records. Definitely more bad ones listed than good.

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#6 Old 09-14-2011, 05:19 AM
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There is so much that goes into a business. Have you ever run a small business before, or are you a business major? I'd sit in with someone who currently owns a shop of that nature and talk with them and be around them for a few days to get an idea of what goes into it...

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#7 Old 09-14-2011, 06:03 AM
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In my opinion, one cannot assume that when ownership changes hands, customers will continue bringing their business to the same shop (especially commercial accounts). At least make sure that the existing commercial contracts do not have an opt out clause that can be triggered by ownership change (or any other change for that matter).

You have stated that you just want to be an investor, and (correct me if I am wrong) 100% owner (because you have "bought" the business). Your technician (previous owner?) becomes "labor" with no "skin in the game." Most CA smog test only centers do not employ more people than absolutely necessary. What I mean is, the technician(s) will also need to do the administrative paperwork on the back-end as well. And in CA, there is a sh!t-ton of administrative paperwork to do (not to mention the inevitable government "secret shoppers" -re: inspectors- that want to make sure your business is not "taking any shortcuts").

If you must buy a business in CA these days, then consider the prospect of a partnership with a current owner/technician. This type of agreement may allow you to limit your liability.

However, if I were to buy a business (any business), CA is the last place I would be considering due to the governmental framework and litigious nature that exists in (my home state of) CA.


A bit of background on me:

From approx. 18yrs - 24yrs of age, I helped mange janitorial supply stores. One small outfit in the suburbs of LA, and one larger outfit in Santa Barbara. Both of which had owners that left the day-to-day operations to their hourly employees because they were too old to do the work (getting their hands dirty or managing accounts). I experienced firsthand the nightmare of landing new and/or retaining existing commercial accounts (because they are almost always trying to deal with their own budget constraints).

From approx. 24yrs - 32yrs of age, I was a financial advisor (for a couple years) and a legal expert for a life insurance company. In both jobs (especially my 6 years as a legal expert), I advised attorneys, accountants, and financial advisors on the more complicated cases they had involving business continuation (should accident and/or death happen) and how to mitigate those risks using various trust and partnership agreements (funded with life insurance products of course). It really opened my eyes even more to how difficult all phases of business ownership are (all types of businesses, you name it). I saw a lot of small businesses in CA (that had a good business model) either close or move out of the state due to various law and tax changes made by the legislature.

Unfortunately, my opinion of CA legislature became so jaded that I decided to move out of CA (and the country) indefinitely. In my opinion, the biggest risk to you and your commercial account customers is "legislative risk" (re: the risk of legislature changing the laws/rules regarding taxes, administrative requirements, procedures, etc. at their leisure).

I really don't mean to come across as negative...just trying to be realistic (without knowing all of the details about your situation). wrx1456 gives some good points. If it was me, I would want to own/run a business that had less competition (more of a niche).

Thanks for enduring my post, and the best of luck to you.

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#8 Old 09-14-2011, 11:57 AM
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Thanks for the responses so far.

I mentioned being an investor because I've found several business models that have a management team in place that are willing to stay on. Many of the places I've focused on have some type of absentee ownership. I've only talked to brokers so far and many of their clients that own smog shops just go in for 15 hours a week to do paperwork. These ones attract me the most so I can ease myself into the business and make a solid transition.

Nothing is coming across as negative. I don't expect it to be a cake walk myself, but if I continue to collect information then I can make a good judgment when the time comes.

I didn't want to get too personal, but the main reason for me wanting to do this is because i used to be ASE cert. and I've had a decent amount of experience working on cars and doing bodywork. However a speeding SUV changed all that for me and my permanent injuries limit what I can do physically. Everything I'm qualified and experienced in is something that involves some type of heavy labor. I've tried going back to school and got a degree in communication with a few business classes, but I can't picture myself as the cubicle type.

I put off cars for a few years but I'm circling back to the idea because that's what I'm passionate about. I think if I owned a business I could be proud of then I'd be able to endure the paperwork and stress of finding customers and everything else associated with it.
My neighbor started a shop with less than $500 and two credit cards a couple years ago and he's still going strong. And I have more mechanical experience than him... I just adopted the idea that if he could do it then why can't I take over an existing business.

Thanks again for the comments. I like to hear the good, bad, and ugly about business.

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#9 Old 09-14-2011, 02:57 PM
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I'd suggest talking with a lawyer first and foremost. Investing, in anything business wise, is a very fickle b***h and will come back at you hard when you least expect it. I'm not trying to discourage you in any way, but things pop up when you least expect them and you have to make sure you are covered...Good luck and I wish you the best as this economy is going down the drain.

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