Should I Take the Plunge?

Q:
I just read your latest e-newsletter, and you’re right. Business will be slower for the next couple of years until we all digest this economy stuff. My paving business (half for residential homeowners and half for other contractors) looks like it will be off by 20 percent this year. But I managed to cut some overhead, and we should be mildly profitable. Now I have an opportunity to buy the business and property of an earthwork contractor we do paving for. I need the land to grow my business. I also can’t afford to lose their account ($250,000 per year) by having them sell their company to one of my competitors. I am very intimidated by this situation but feel I must continue to take the risk and make the deal. I wouldn’t pay anything for the business since they haven’t been very profitable. They just want to get paid for their real estate and equipment. I see their inefficiencies, and I think I can change that. But the fact remains that I will be getting into debt in another type of business that is susceptible to the whims of Wall Street. Yet, in a couple of years we might look back and say, “What were we so worried about?” Opinions?
Vince Gongo
Rochelle Paving

 
A:
Buy the property and equipment based on its real value, not what the seller wants. Get an equipment reseller to give you an opinion of what the equipment is worth today. And get an honest opinion of land value from at least three different real estate brokers. Your real estate lender will require an appraisal of fair market value today as well. Then, get a conservative 50 percent land loan and use your cash to pay for the balance of the property and equipment. Next, interview the company’s three key employees. Decide if you can continue with some of their business and make them partners in that division if they perform. Give them an incentive to make that business work without you having to micro-manage it. This way you aren’t letting go of the company value, losing their customers or missing opportunities for future work. Let me know how it works out.

Q:
I am the owner of a small but very good finish carpentry and trim company based out of a little town is South Dakota. I have an opportunity to grow but have the problem of finding good reliable help, plus I fear taking the plunge to hire an experienced high-quality worker. I am a very good trimmer and expect only the best. I recently got a website and started advertising. My five-year plan is to become one of the best trimming companies in the United States, but I am small right now and don’t have a ton of money to get things going. I am extremely confident in my abilities but can’t find the courage to jump in neck deep, being a small company from the Midwest. Can you help me with any suggestions, contacts or advice? Thanks
David Emmel
Trademark Carpenters

A:
I like your vision. But growing a business takes people and money. Start by hiring only the best. You won’t find any good reliable help by hoping they show up at your door. Be aggressive, and make it your top priority to find a person who can fit the job description you need. Hire for attitude and then train for skills. You want to hire people you can trust, who have lots of enthusiasm, are willing to learn and can someday run several jobs for you. Pay a little more than your competition, and you will attract better people. Spend at least one day a week interviewing, advertising, looking for people and then training them. Next, start saving your money so you can do bigger jobs and expand. You might also consider moving your business to a larger city with more opportunities to grow. Good luck.

Construction Business Owner, November 2008