Building an asset or Building a Business?

[baileyuph]

In consideration, most upholsters or the like will or can work their enire career in the field and at retirement have nothing to sell, right?

Sell the equipment or real estate if it is involved but will most of our business have a monetary value?

There is something wrong with this picture, don't you think?  How can this be changed?  Any ideas?  Change the business or business type?

Doyle

[sofadoc]

In consideration, most upholsters or the like will or can work their enire career in the field and at retirement have nothing to sell, right?

You're quite right.
Over the last 20 years, I've bought the remaining inventory from several shops that were closing. Here's what I've observed:
1. Always renting a commercial space, or working from home. So no real estate involved with the business to sell.
2. They tried to get fair market value for their machines, tools, and supplies. Found no takers.

I don't seek these people out. They come to me. I tell them up front that I don't need the stuff, so I can't pay them anywhere near what it's worth. More often than not, they offer me everything for $200-$500 minus sewing machine.

I had one retiring upholsterer last year who tried to sell me his "client list" for $500. I laughed him right out the door.

When selling an upholstery business, you can't really sell your reputation, since you won't be there to do the work anymore. So aside from machines, tools, supplies......what else is there? And "Good luck" getting a fair price for that stuff.   

[JDUpholstery]

Other than my building, I don't see much of a "retirement" in the stuff....its the money you make doing what you do and reinvesting it properly that will secure your retirement....the nice thing about upholstery is once you have the tools you can continue to make money with a lot less reinvestment of funds into building the business, so once your set, start taking the allotment you used to spend monthly in tools and deposit it into a retirement account

[kodydog]

The only way I can see value in an upholstery business is if you are only the manager and all the labor is performed by employes. Then someone with good business skills could buy the business and step in where you leave off. And then the business would only have value if the profit margins were high enough to justify the purchase price. Seems to me there are much easier businesses to get into with higher profits. I'm guessing most on this forum, the business chose them rather than they chose the business.

[sofadoc]

...... so once your set, start taking the allotment you used to spend monthly in tools and deposit it into a retirement account

My wife used to work with me. About 15 years ago she went to work at a bank.
She has worked her way up the ladder there. She recently got a really nice promotion, bonus, and raise.

Her entire take-home pay has always been consumed by insurance and 401. We have always lived off my pay alone. Now with her raise, we could technically could live off her salary if we had to.

I'm guessing most on this forum, the business chose them rather than they chose the business.

I think that's true for the "Lifers". But for those who made a mid-life career change, I think many of them choose something in the stitching field because they thought "Hey, all I gotta do is clear out enough room in my garage for a sewing machine, and I'm all set".

As far as one-man, or mom & pop shops go, I don't think this business model is even geared toward "building an asset".

[baileyuph]

Dennis, the data pretty well supports what you say.  I have always done what JD says, I don't take credit for being smart but do take credit for working hard.  LOL.

I regroup often and review where things have been and where they are going.  I am like Dennis, been in it a while, everything is paid for including my property.  My business property will be the only asset when I shut it down and that isn't growing because of the economy.  I could have sold for more 7 years ago than it will bring today.  It is solid masonary, brick over insulated block, AC and central heat, expensive insulated (wood thermal) window.  It is facing an interstate and inspite of all these virtues, commercial is still sitting empty and values haven't come up.  But, maybe some day it will have some value, good think I havn't planned on it taking care of me when I give the business up.

But, back to the business, I am definitely going to adjust my shop rate up some more, this thing about retirement investing I want to enhance some more.  When I retire, the plan is to have more to spend than I earn now.  Best to think that way because over time, inflation will catch up with you, so to speak.

My health insurance is $1000 a month, that I plan to keep, a medical problem can wipe you out.

All your input is meaningful, we think a lot alike.

Doyle

[gene]

The only value in a 'mom and pop' business, no matter what the product or service, is in 'mom and pop'. When mom and pop die or retire there is no more value in that business, other than the physical assets as mentioned in the above comments.

To grow a business that has value in and of itself is extremely more difficult today than it was just 8 years ago when I started my upholstery business.

If you are in an industry that is not growing, and our economy is not growing, and the costs of doing business are increasing drastically, it is almost impossible to grow a business that has intrinsic value.

One thing that is going to hurt a lot of small businesses is Obamacare and the IRS tightening up on the rules for a subcontractor versus an employee. They have a 5 page definition of what a full time employee is, and the IRS has hired 16,000 new employees to deal with Obamacare fees being accounted for on our Federal tax returns. These new rules for 1099's are a part of catching workers who are treated as subcontractors and should be employees.

My point with the Obamacare issue is how do you, as a business owner, find the time to deal with all this? If you don't have the money to pay an outside consultant, you either have to do it yourself or keep your business to being a 'mom and pop' venture.

gene

[byhammerandhand]

You could consider taking on a partner and transitioning a business over to him/her.  If you business is simply your job, it has little to no "blue sky" value.   Now if you have 10 people working for you, then you have some value.

I hear Sofadoc is going to get an Hispanic partner, in order to tap into that market.

The new company name will be "Payne-Diaz Upholstery"   ;D

[Mojo]

When I was still doing business consulting there was a formula used to arrive at the sale price of a business. It was based on net profits plus inventory and real estate as well as assets such as machinery, equipment, tools, etc. I have since forgotten the formula but one of the keys to making the deals come together was the formula when applied to revenue.

The above applied to many businesses such as manufacturing, retail shops, restaurants, etc. Mom & Pop businesses were much tougher to value and in most cases value was based only on real estate and equipment.

What makes an upholstery business so difficult to sell is because it is a specialized trade. One cannot buy an upholstery business, step in and start making money unless there are employees who can train you. The same holds true for auto repair places, HVAC businesses, etc.

Chris

[byhammerandhand]

If your net revenue is $40k your business is not worth much, if it's $400K, then it's worth a bit and if it's $4 million, then you're talking.     Gross revenue doesn't tell you much; there are companies with billions in annual sales yet going bankrupt.

When I was still doing business consulting there was a formula used to arrive at the sale price of a business. It was based on net profits plus inventory and real estate as well as assets such as machinery, equipment, tools, etc. I have since forgotten the formula but one of the keys to making the deals come together was the formula when applied to revenue.

The above applied to many businesses such as manufacturing, retail shops, restaurants, etc. Mom & Pop businesses were much tougher to value and in most cases value was based only on real estate and equipment.

What makes an upholstery business so difficult to sell is because it is a specialized trade. One cannot buy an upholstery business, step in and start making money unless there are employees who can train you. The same holds true for auto repair places, HVAC businesses, etc.

Chris

[Rich]

I'm glad I enjoy doing this work b/c when I'm finally ready to put down my shears, the only thing I'll get a return on are my memories. That is, if all this vinyl and glue doesn't take that away too!
Rich

[sofadoc]

I hear Sofadoc is going to get an Hispanic partner, in order to tap into that market.
The new company name will be "Payne-Diaz Upholstery"

Apparently, many of my customers have already been made aware of my impending merger. Because they've been calling me that for years. :D

[brmax]

Aspiring almost started to consider being an apprentice,  im trying to look way down the road on this topic. 
Guys business is talented personel in demand, how it is known is the asset.
i wish i already had your talents yet i feel comitment. 
i had an oppurtunity as my earlier seniorship in school part time removing finishes on furniture, and the labor for loading and delivery of reupholstered, refinished products. they were good trade people to work with.
Im Back
have you all noticed the big push on tech type training, you know actual work for the high school age. wow going to have actualy produce, nomore virtual pc world ?? maybe
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