To Sell Out or not?

[David Iannone]

On Friday I was asked by the biggest sign company in my small town if I would be interested in selling my business to them and working for them full time and running the vinyl and CNC routing side of thier business.

They do all the big stuff with bucket trucks, to the quick easy vinyl, down to embroidery and tee shirts.

I said "thank you" I am not against the idea, I need to think about it.

I work alone now a days every day in my shop, and I do ok. But I am not part of a creative environment anymore.

They have designers already. I have to do no design. Just run equipment and make signs, wrap vehicles etc with help. I would run one Hugh portion of their business after the transaction. And help the company grow because I bring a lot to the table in the Sign Industry. I started in this industry when I was 15. I am about to turn 40. Maybe that's what has me buggin out?....LOL

My question to anyone out there is this:
Is there anyone willing to share a story where they sold out and went to work for a larger company? Did you end up feeling short changed?

I have had my own sign shop since 1999. Prior to that I worked for a Fastsigns Franchise from age 15. I know the dollar amount is going make a difference in the decision. But mostly I am wondering if not being my own boss any more will be good or if I will regret it.

Dave

[MogulTx]

David,

I have been asked by a large company. I have not done it. I would be interested in doing it IF the $ was right. One thing that my banker pointed out to me: I am making $. Pretty good money. If I were to sell out, I would then need to invest that $ so that it would earn a similar amount. Think about that. If you were to sell, could you put that money with an investment idea and make as much extra money toward your eventual retirement? Would you gain some other good benefits? Like better income, cheap insurance, less stress.... better potential earnings opportunities...? If so, and their offer is GOOD... the answer might be that you should do it... You sound like you are at least "open" to the idea.

Only you can answer whether it is the right transaction and you need to think through the full transaction and fairly consider the benefits and potential pitfalls. Once you are informed, you will probably understand what you want to do.... Don't rush. Don't leave yourself open to being abused. Make sure you WILL be paid. Expect that they may keep you on for a significant period of time.... but that they could dump you, also.... be cautious. Make a solid decision and don't look back!

Best of Luck to you. I hope it is a simple, clear, pain free decision for you.

Monty

[MogulTx]

BTW: After I was asked, the potential purchaser never followed through, HOWEVER, it provided me the opportunity to consider the scenario. I established what I might want. I figured out what I would want to do if they bought me out. I made some guesses as to how long they would keep me on staff. I'd have been interested in being sold, if the type transaction I was envisioning had come to be- so what it did for me was to make me more aware of what I might need in the event of a sale. Maybe you will get at least a little of that type of benefit from the discussion ( if nothing more than that...)

[myxpykalix]

I can't talk to your specifics but i can tell you this....

I have never worked, in my entire life for anyone other then myself. I don't know what it means to "take orders" from someone else. A few of the things i'd be concerned with is how the deal is structured with any kind of "non compete clause" if things go south...

Plus once you sell your "tools" it will be real hard to re-establish yourself. Ask yourself....What do you make a year now on your own?
What will you make working for them?
How much will you be paid for your tools?
How much will you be paid for your "good will"?
Most people who go into a salaried position for a 40 hour work week, wind up over time being required to do 50-60 hours and so now that sweet deal you thought you had is turning a bit sour.

Then if they hire someone to learn what you know, and you teach them, you're out of a job, and no tools.

What kind of guarantee of employment would you get?

If it was me, i'd think of some type of structured agreement where you retain possession of your equipment, keep it at your shop and have some type of non compete clause with them where you, while employed with them will not do work for anyone else but you are paid more then you would make on your own....

OR you could lease them your equipment, move it to their shop, while you are employed have an agreement that no one else could be hired to do the same work you do with the CNC.

So if things don't work out, you can take your tools and go and do your own business again. Don't make any agreement where you could lose your tools and your job and get screwed with some type of noncompete clause.

[bobmoore]

David, I have been involved directly or indirectly with many small company buyouts. The vast majority of these, where the original owner was brought into the management team, did not work for more than a year or maybe 2. I have read some of your business plan in the past and you run a very efficient shop. If this company can't or won't pay your price as a vendor, I don't think they will pay you a handsome wage to make their parts for them as an employee for very long. Also written agreements are pretty much worthless if things aren't working out between you and your new boss. How will you react if your 30 year old supervisor, who never printed a sign in his life tells you, you are doing it all wrong and you are too slow. I don't mean to be a wet blanket to you new opportunity. I am just telling it how I see it from my own personal prospective. Your experience may be entirely different. Bob

[coryatjohn]

I can only offer you my opinion on another level. I've been independent for over 35 years. I've been offered fantastic positions at world leading companies with amazing and flexible schedules, pay and benefits. I've always said "Thanks, but no thanks." Being independent is far better for many reasons, the most important of which is peace of mind and freedom to do as I please. The moment you agree to such a thing, you've switched from an independent to a dependent. Someone could walk into your office one day and say you have to do something you wouldn't normally do, nor want to and you'd have to do it. They will too. It's inevitable.

So you have to decide if a bit of short term financial security is worth a lifetime of humiliation and turmoil. Are you comfortable now financially? Do you feel your life is going in the right direction? If those two things are "yes" then you have your answer. Be polite, don't burn your bridges but do what you must.

[Brady Watson]

How do you want to feel each day?

Will doing this make you happier or more fulfilled?

Is being a subordinate more appealing than being the king?

-B

[jerry_stanek]

Brady beat me to it you have to ask yourself are you happy. I did this and would never do it again. I used to look forward to working now I just go to work. Remember the reason they call it work.

[barrowj]

David,

As it has been said, most of us have experienced this at one time or another. I sold one business 10 years ago for a good sum and then went to work in the IT field where I still have. I kept my equipment so that wasn't in the deal and I was happy till now. I am waiting for the company to retire me (I will work making a great sum of money until they dump me, it's an easy work from home position). I can't wait for this to happen so I can spend more time in my shop.

I guess it all depends if you are getting a good deal on your equipment so if things don't work out and you structure the contract (I hope you be sure to get one) so you can go back into business that you can afford to purchase new equipment to start up again. It wouldn't be a good contract for them to buy you out and not have a no-compete clause but be wary, only you can decide if the price is right and the benefits are too good to pass up but at least get a work contract for a specific number of years or a buyout if they dump you too soon after you sign the deal.

As other have said, I've seen it happen too many times. They buy you out then let you go after a year or 2 or you just can't take being told what to do by someone that doesn't know the business. On the other hand you may be very happy there and the new business relationship is a great one!!

Joe

[bleeth]

9 years ago I closed my shop and went to work for a large cabinet company and was quickly put in charge of all project management, installation, and the custom shop. I enjoyed the work, payscale, and benefits and although I was putting in many hours a week felt much more gratified mentally then fighting the daily details of running a small shop. The job lasted a year until the Chief Operating Officer job (which I turned down) was given to a guy who was in over his head. I had sold them all my equipment except the cnc, which I "leased" to them. When the end came as he started firing all those around him to cover his own inadequacies I ended up back in my own business again! The company was an old established outfit with a great reputation and ended up closing it's doors. You never know going in what the future will bring. In general though, people who go through most of their lives as self employed don't succeed long term as employees. And every rule has exceptions.

[scottp55]

Just a cautionary tale;
Dad sold his CNC biz to the Belgians 3 yrs ago. My brother(50 this yr) stayed on to manage the shop (35-50 employees) exactly as he'd done for Dad. I've watched his health and attitude decline. VERY good money(Maserati/Yukons/Lakefront Camp/Largest trailerable boat made/etc.), BUT....They crossed swords too many times over how to do things, and of course they always won. They let him go last month...he still has 2 yrs severance pay because of a GREAT contract. And because They let Him go...The non-compete clause is not effective, BUT Dad and I really can't see him ever working happily for another big company.
No one in the family thinks he's been happy the last 3 years. So he's really at a crossroads and a little lost.
BE Careful!
Just personal, but I can't imagine waking up and not looking forward to the day like now at age 59.55 years old.

[dmidkiff]

http://www.talkshopbot.com/forum/images/icons/icon1.png Cut a few jobs on the bot today then went fishing (http://www.talkshopbot.com/forum/showthread.php?21432-Cut-a-few-jobs-on-the-bot-today-then-went-fishing) This kind of day will be over. Just a thought. I never actually did that but the possibility is always there when self employed.

[Ajcoholic]

Dave,
That is going to be something only you will be able to answer for yourself. I have also been self employed for my adult life (started full time basically taking the reigns of the family business in 1995 at the age of 24 - yikes!)to today - just 20 years but at 45 thats seems like a while now. And I have at least that many more to go until retirement if all goes as planned.

I have often thought, that working the same kind of business as I have now - but for someone else dealing with the day to day business side of things (basically what my father did, when he said to me "your in charge now"). I know in my case it would be pretty unlikely. However, I did here from one of my suppliers that an owner of a much larger shop had talked about the idea of me working for them, instead of setting up a new business 4 1/2 yrs ago. I decided at that time that I was only going to be comfortable working in a shop where (a) I had all the tools, equipment and working space to work as I am used to (and suffering to a degree of OCD and anxiety, I really do need to have complete control of the shop and how it is kept and (b) had the freedom to continue to design and build things the way I thought it should be done. And the ability to always try new ideas and processes, etc.

In a nutshell, I really do not think I personally would enjoy working for someone else, as attractive that the idea may be - of just going to work and not having to deal with the bank, the government, customers, etc.

I think many who have been in business for a long time for themselves, would feel the same - and this thread shows that. But I know others who were at one time owners of their own businesses, and after they either folded, failed or just came to an end, went back to working for someone else much happier.

This is a HUGE decision, and I wish you well. It would be nice if you could do it on a trial basis. But is that possible? Best of luck. But you seem like a pretty bright individual and I think in the end you;ll choose whats best for you.

[coryatjohn]

"Better to reign in Hell, than serve in Heaven" - Milton

[markevans]

This is weird advice coming from that guy who is working in the corp. world and would give up half his pay to be able to spend more time in the shop.

Hear them out, you are in the drivers seat at the moment. Let them work up a proposal and then when you get it, make all the changes that would make you happy and safe. Go ahead, think big, this is the time to find out if they want you or just think you are a pushover. Ask for enough cash that if it does not work out it still worked out!

As always, free advice is worth right around what you paid for it.

M

[tri4sale]

Look at the benefits of a merger not a buyout, with you getting an ownership stake in the new venture. And definitely make sure you are protected if they decide to go another direction after a while and let you go. With an ownership stake its a bit harder to let you go (but not impossible, all depends on how the contract is written)

[jerry_stanek]

then there is always what my father told me about owning your own business. You only have to work half a day when you own your own business it doesn't matter what 12 hours

[pappybaynes]

"Better to reign in Hell, than serve in Heaven" - Milton

I would flatly disagree with Milton on that...just say'n

[harryball]

That's a call you'd have to make. As for me, I've been involved in 3 "sellouts" in my "career". The first was my business, sold the customer base and assets and offered ongoing support for a period, the second I was co-owner and we did a merger and worked for the parent company and the 3rd was a company in which I was a key position and it was sold to a larger company and I went along for the ride.

In every case it did not turn out as expected, did not achieve anything near what I had hoped for, always ended up creating more stress and generally all around just made me more miserable. Financial harm, no, just not enough reward to keep me from being trapped into a miserable job I couldn't find a way to escape.

There is much more to the equation than money, make sure you weigh it all.

/RB

[gerryv]

I'd base such a deal and my selling price on the following assumptions: 1. I'll be let go within three to six months depending how soon they felt they had absorbed all they could from me 2. My existing customers will become theirs and I'll legally not be allowed to take them back or approach any of theirs for a period of time (two years was typically enforceable when I was active). 3. My estimated amount of lost income during any non-compete period. 4. Whatever I propose, they will come back with a lower amount so I'd need to figure in my asking and bottom line prices ahead of time. That way, anything longer than the three to six months would be a pleasant bonus for me. And, like Harry says, "There is much more to the equation than money."

[willnewton]

I spent the morning thinking about this. I have also been self employed for a long time and have often wondered what it would take to give that up.

Let's take the business aspect and tools out of the equation. Would you quit your business to go to work for this company as a machine operator? Because a week after you start, that is all you will be. Been there, done that.

Furthermore, you may be resented by other employees, as you were paid "extra" to come to work or will be paid more than them. They will certainly not care about your past experience or skill level.

If they can't see your value as a contractor and have the opinion they will be saving money by buying you out and making you a wage slave, how does that benefit you? By providing you with a pay hit, losing your equipment and business and gaining a boss? WRONG!

I can promise you that it won't work out in the end. You will be unsatisfied with having to change your work ethic to meet theirs. They will regard you as an overpaid employee and after a while their "designers" will suddenly become CAD/CNC designers and you will gladly be let go so they can hire a cheaper employee to load the machines.

If your business was failing or you had personal/health issues that required you to get a "real" job, then go for it. Otherwise, all I see are reasons for them to hire you and no reasons for you to leave your current situation.

I would proceed to use this chance to become a trusted contractor for them. Sit down and explain to them the costs in maintenance and upkeep and training. Show them how dealing out a huge lump sum hurts their bottom line vs. having an entire CNC production shop at their disposal only when they have the need to pay for it. Dealing out a $100k to solve a $300 problem is just ludicrous!

You see, they have it all wrong and it is up to you to set them straight. Help them see the true value of the business, not the person.

[David Iannone]

It sure has been a long weekend for me. But we spent every day on the lake, and the future is all that was on my mind.

Thank you to everyone for your input.

Yeah this is my largest local "wholesale" customer. I do all their CNC cutting and all their Digital Printing, Lamination.
They currently only run a vinyl cutter for the "vinyl" side of the business.

I have been doing business with them since Jan of 2012. My wife and I go out to dinner with the owner and his wife a few times a year. Its been a great working relationship so far.

Financially we are ok. My wife is a RN and back in school furthering her education. Its just the solitude the last few years that has made me really think this might be good for me. I don't have any real solid plans to grow my business in the next 20 years.

75% of it comes down to money on the table, the other 25% is how much longer will you be in business to pay me my salary (I plan on being there for the next 15 years)?

TRUST ME....I don't want a percent of his business, I don't want to take payments.....there are banks out there that will lend the money. No all cash up front no deal.
As for my yearly income needs, I already know what I am worth as an "employee".

I just am still having trouble letting go of the thought of being a subordinate or being the king?.....LOL Thanks Brady but even if I sell out I will still maintain the king status!

Dave

[Davo]

Why can't he just feed you non-stop work instead?

Does he want to get you cheaper via paying an hourly rate?

Would there be a no compete clause once this deal goes through?

[David Iannone]

Why can't he just feed you non-stop work instead?

Does he want to get you cheaper via paying an hourly rate?

Would there be a no compete clause once this deal goes through?

This is a good point and also one of my ideas to still increase my business, while still helping him out.

Here is the thing. If he was to send me 100% of his banners, coroplast signs, magnetic signs.....easy stuff I could make them at wholesale for him and I still make good money working alone. He then turns around and adds his markup and he "should" still do extremely well. Better than him putting his own labor on it because he is making vinyl signs the slow way now a days.

If I was to go in house I would do all the above, plus take over all vehicle graphics, all finished dimensional signs including painting. I would not have to paint much, if at all. He has a fulltime painter and paint booth. Just have to make sure we stay on schedule with things and jump in when needed. Same with vehicle lettering jobs. As far as outside installs I want nothing to do with them, although I would give my input as needed as to how I think something should be done if it is in my comfort zone of knowledge. Currently he is doing all that and he wants to get out and sell every day and get away from the manual labor.

Here is where the water gets a little muddy. As some may know I had a very bad fall off a ladder in 2009, and just in the last year and a half have really got back to moving around good enough to start to try to focus on building the business and upgrading my equipment. So I am at the point now where I am ready to try to get local accounts like customers with fleets of service vehicles (for example) We will start to cross paths, and at that point I don't know how he will react. Believe it or not its never been a problem to date since through my recovery I went into the internet wholesale sign approach since I was not able to be at my shop too much. And when I was I was doing everything from a wheelchair. He knows this and I actually told him a few weeks ago I was about to start going out and "knocking on doors" looking for key accounts, but didn't want to step on his toes. I consider him a friend, as much as I do a good customer.

So, yes he is probably thinking he can get me cheap, but that won't happen. I have made it clear to him its not about the money, but about growth. All my friends and family I have talked to this about say I would be foolish to make a move. I am in no hurry, and it is more likely he will not want to meet my salary and business price. But like some have said so far in this post, it is an exercise in putting on paper what I think I am worth at the moment.

When I split the business with my Dad in 2006, we split the equipment evenly, and sold off some of the stuff neither of us cared to keep. We had a Signs Now Franchise in DE who we worked with to buy our customer base only. Everything looked like a slam dunk. We reached a number all could agree upon. I was going to work with them for a few months before I moved to GA to make the customers feel comfortable. Well, right at the end he said "actually I can only give you half what we agreed on" Well, no deal and I moved and my Dad just kept the customer base. My Dad has a sheet metal business so he really didn't care to keep anything to do with signs. But the funny thing is the first year I was gone my Dad did more Gross with signs than the last offer on the table from Signs Now. He doesn't advertise because he doesn't even need the sign work. And he sends me print jobs and CNC cut stuff often that I ship to him, so we are better off in the end now not selling to the guy, even had we got the full price.

I am at least happy to be able to consider something like this again, but like some have said, in this deal I would be giving up all my equipment. Although I like the idea from Dave R. how he leased his CNC and then got it back. Something like that could work.

I will let him bring it up again. And my first approach will most likely see if we can even agree on what my salary as his employee would be. It is very possible we may not get past there. But I am going to be honest with myself and with him. At least if we do not reach an agreement and I move on to building more local retail customers he should understand, especially when I can add a helper next year, then its game on. I plan on being in my industry for the next 20-25 years. I ain't going anywhere. Although I am trying to add more CNC work to the Bot, which may or may not be sign based, that is as far as I will stray away from being a sign guy.

Oh, as for a non compete, If he wanted one I would not sign it. The jobs they send me half the time they forward the logo or files from their customers. I have not or would not EVER use any of that contact information because that is just not how I got to where I am. So If he doesn't trust me by now then this would also be a good thing to find out. However, I would defiantly have to have a lawyer involved in the contract, cause I am not good with fine print.

Dave

[coryatjohn]

Perhaps your suitor smells competition ahead. It may be he has knowledge of something coming down the pike and wants to "button you up" so to speak before he loses you to his competition. It also might be that he wants to contain his costs, rule the roost or just have a sure thing instead of something that may slip through his fingers.

If it was me, I'd be suspicious of his true intentions. Rarely do companies make offers like this for your good. It's for their good. If you manage to eek out a gain from a buyout, it's basically good providence and not part of the plan.

As for those darn ladders, I had a nice fall off of one about 15 years ago and I'm still smarting from it all these years later. I bought a $1000 contractor grade scaffold a while back so whenever I need to get up high, I use that. It's a lot more difficult to set up but I feel totally secure standing on a 5x7 solid surface.

[David Iannone]

Well, there has been brief conversations back and forth about more of some logistics. I am not going to make the move.

He said he didn't think he could come up with the lump sum to buy me out. So I would definatley be scared about getting my salary each week (we never even got that far as to speak about my salary). I think maybe he saw that I have been slow lately and maybe thought I was easy pickens. Not even close.

The last thing he offered is to clear enough Sq/ft in one of his lower buildings and temp control it and partition walls so I could move all my equipment to his location and he become my landlord. We each keep our own companies. He would send me ALL of his easy quick sign stuff. We esablish pricing. But this gives me no room to grow, and he could do that right now anyway if he was serious about it. And talk about potential customers being confused when they come to 2 sign shops in one??? LMAO.....Also I am paying $950 a month for 1600 sq/ft currently and the utilities are built in so I dought he could match that deal. It seemed exciting at first glance, but I need to get off my *** and get out and sell. Nothing is easy.

Sooo, I am planing to get out this week and start to introduce myself to every sign company withing a 50 mile radius and offer my CNC and Digital services to all Sign Shops in the area. Most of them should have Digital Printing in house, but I suspect many would not have CNC.

Also, in the mix of talking this over with my wife and daughter over the past week my daughter who is 13 now spoke up and said she wants to start to learn how to use the Flexisign software, and learn the business........That was music to my ears. I have always hoped and also dropped hints for her to want to learn some of the sign business and see if she likes it. So now I have a helper for the summer, so that solves my isolation for a few months and gives me the incentive to try to grow this thing so maybe one day she can have it. She came in with me friday and it was so fun. I just had her follow and watch every little thing I did while I just talked and explained it. Most of the computer stuff made no sense but this week starts the Flexisign software online tutorials. By the end of the summer I suspect she will be better at the software than me.

First order of business for me the first of this week is Samples, Samples, Samples. I will take one sample for every shop I visit made off the CNC for them to keep, as well as a sample board I will carry like a traveling salesmen.

Thanks again guys for all the inspiration and advice. It really did help me a lot through this bump in the road.

Dave

[jerry_stanek]

When I made samples I customized them with the name of the company that I gave it to.