First a little background. I've worked 12 years for a small business that custom fabricates and installs countertops and other laminate products. The owner is 59 and looking towards retirement. We have discussed the idea of me buying the business.
He is the second owner of the place and had owned it for 3 years before hiring me. When I started working for him (I brought 7 years of expereince with me), he had six fulltime, long term employees and 7 major wholesale accounts, plus a large retail base.
Over the years he has managed to lose all of his wholesale accounts except one. Every employee except me has quit over pay issues, so I've been the soul employee for the last year and a half. I've taken advantage of this situation and have gotten 2 pay increases by threatening to quit or start my own shop.
Very little money goes back into the shop. It is not unusual for him to be 90 to 120 days late in paying his suppliers. Most of his suppliers insist he pay cod, no check,no delivery. A huge amount of money goes to his kids who always have thier hands out.
When I've confronted him about making more money his response was. "Bill, when you start bringing in more than the $24,000-$26,000 a month that you are now then you can have a raise. I shook my head at that response,got pissed,crawled up his ass and got my raises.
Last week he gave me a rather simple buyout proposal. Most of it rubs me the wrong way and puts sour taste in my mouth over the whole thing. Here is what it says:
We have met with our accountant to establish a fair price for the purchase of CTB,inc. In order to determine the price of the corporation,we have averaged the net profit over the last 5 years with the assets and inventyory of the corporation. This amount figured to be:$220,000.
The terms of purchace will be 25% upon signing the purchase agreement and three equal payments due on Jan.15th over the next three years.
WORK AGREEMENT: Three years of continuous employment at an agreed salary or buyout of remaining time if three years of employment not completed. Work duties will be realigned over course of time.
Accounts payable and accounts recievable would be a stop- start on the date of purchase of corporation.
I already do most do most of work in the shop. Fabricating,installing,shop maitanance,sales,Pricing, strongarming payments out of deliquant customers. I refuse to do jobsite measuring, again a wage issue.
The shop itself isn't worth $220,000 by any stretch. The building is rented. In my opinion the equipment and current inventory is worth about $50,000 and that's a generous.
The company has a reputation of poor service among the local contractors. I would change the name of the business if I bought it.
Is this a lagit offer or Am I being suckered into providing my boss a nice little retirement egg?
For $200,000 I could start one hell of a shop on my own.
I'd be gratefull for any advice or opinions. Thanks!