New Business Venture - Auto Repair Shop

OK, A friend and former co-worker has the opportunity to purchase the shop he's currently working at. Owner is moving and offering him an insane deal. Just got word he has a second shop he is willing to part with as well a few miles down the road. All were purchased as franchises but he sold most of the stores back to the company and is willing to give these 2 to my friend for a steal. He needs and wants me to partner with him and run one store while he runs the second. All profits will be split 50/50 as we will have a full partnership.

Here's my concerns:

Firstly, both stores are pretty slow. Previous management has destroyed the customer base, but that's being corrected as we speak. Second, I am going this weekend to put eyes and hands on both locations as I haven't seen them yet. Both are relatively new construction (<5 years), but I haven't seen them. Third, they're in Austin and I live 2 hours away. I've done the commute thing before, but being an owner, that is going to require me there more than it would as just an employee. While this sucks, it's not too bad as I have a place to crash.

Now, the biggest thing is this... I have been offered a job at a start up that is an absolutely amazing opportunity to get in as an Executive Assistant to the CEO who will mentor me to take over (his words) the company after he's retired. The product will absolutely change the world and the starting salary is 6 figures. The problem is, I was offered the job a year ago and the company has yet to launch. Product design and certification is being finalized now, but who knows how long that will take. Another 6 months, a year, 2 years? I don't want to pass up this opportunity for a maybe. Know what I mean?

What say you Hive? Give me some perspective. SWMBO is behind me 100% on any decision I make (I love her), so that's not an issue.

I don't think it's feasible to live two hours away from a business of this type if you want to manage it yourself. And I'm guessing it will be hard to find a good manager...but it might be something you can do in the long run if the other job pans out.

Basically, if it were me, I'd plan on moving so you can be near the business.

+2 ^^^

The second opportunty sounds like a dream I had once and then I woke up.

In reply to ClemSparks:

I do plan on being there 5-6 days a week and coming home Saturday afternoon/evening. Probably will not be home much the first 6 months at least getting everything running smoothly. You are correct, finding a good manager will be difficult. I plan on being there open to close and making damn sure the business works. The place in Austin to stay is my moms, so no rent or whatever. I see it being able to work, I just don't know if I should jump on it or wait for the other to pan out, some time, maybe. Know what I mean?

If you're sharing ownership with your buddy, then you are owner and you should be able to have some control over how much time you spend there. Now, if his requirement for you as partner if for your to work full time, could you come to an agreement of "partner must work 40 hours a week or pay employee to work in their place?"

Lets say you both put $300k into this adventure as partner, and ever year you net about $50k in personal income from the business. If you can hire someone to take your place for $35,000 and they do a bang up job and still nets another $15,000 in profit, why can't you do the other thing as well?

Opportunity #1:
How well are you cash capitalized?
Running this shop and remarketing it to success will likely take more dollars than you may be thinking.
How long are you willing to go with not only zero profit but it actually costing you money to feed this business?
Another Contradication: The Home office of the franchise wanted back the other locations but they did not want back these locations?? Get some more understanding of how this "home office take back" worked. Did the majority of the locations get sold to another franchisee? Would that guy not buy these two? Why?

Opportunity #2:
He wants to train you to take over a business that has not yet started?? This is not why people get into business. They get into it to make as much as possible and then sell it off for as much as possible.
At this point the founder may be thinking differently but once it is running profitably, he will sell it off or take it public (a different sell off.)
It does however sound like a cool job, just not a job that really exists today. Take the bird in the hand.

With a mythical 6fig job offer on totally unproven technology that was given over a year ago, I'd go ahead and call that vaporware. Sounds like the owner of said product thinks rather highly of himself. I have no doubt the product could revolutionize the world as we know it (it's not a bacon cooker for my car is it?) but at the same time, it's an unknown quantity. At least with the shop, you know. The wild card with the shop is.... the future. It's quickly becoming the time where a shade tree shop needs to pony up serious cash for tools and gear, or get pushed out by the dealer for needing too many specialty pieces. Just the ones I had to buy for the MINI were annoying enough, and that car's a 15 year old design. I can't imagine anything designed more recently to be better.

How do you feel about marrying your friend. If you go in as 50/50 partners, that's basically what you are doing. That's not necessarily a bad thing, but it is something most people don't think about. The divorce can be messy. Have a clearly defined exit plan just in case things don't work out. I've had a business partner for 8 years. For us it works just fine, for a lot of people it doesn't. Think long and hard about how you feel about and relate to him. It can make or break a partnership.

The two hour commute would suck. Your plan for staying at your moms is doable but remember, Saturday is a very busy day in the automotive repair business. It might be difficult to cut out early to drive home. I would seriously consider moving.

Other than that, I'd go for it. My business partner and I are considering opening a small shop. We are in the business plan/location/capital investment stages. The dollars add up quick.

Edit: About the 6 figure job. I'd forget it until he tells you to start Monday. Then I'd rethink things. By that time you might be making close to the 6 figures in your own shop. Those last three words are worth 5 figures by themselves. Do your own thing and do it sooner rather than later.

The home office didn't WANT the stores back per se, the owner just decided to go back to his home town where he has 10-12 of them and not mess with the ones in Austin. He made his money off them and then made it again when he sold them back. He loves my friend as he is the one who brings up all the stores that have had crappy managers before to extremely profitable. That's why he's offering my buddy the stores. Giving him the opportunity I guess.

The other opportunity has had the technology proven. It's been in testing since July and the design is being simplified and the size reduced as we speak. I can't go much more into detail, but if he called me today and said "let's rock" I'd be outta here. LOL

In reply to Toyman01:

Love that. Thanks. We are sitting down Saturday and going to go over things more in depth after I put boots on the ground at both locations. We have been friends for 8 years and worked together extremely well.

PHeller wrote: then you are owner and you should be able to have some control over how much time you spend there.

That is some funny E36 M3 there, man. In a small service business, the owners paycheque is intimately tied to the number of hours spent working.

I would definitely not burn any bridges with the tech wizard and his product, but I would tell him you can't jump until it's a Real Job. Meanwhile, I'd be upfront about the tech job with your potential shop partner too: you have this big thing waiting in the wings and you'll grab it if it ever becomes Real... BUT you won't leave him twisting in the wind either. You agree to find a manager or do whatever you have to do in the event you have to leave. The transition period will no doubt drive you insane, but if you're frank and honest with everybody it should work out.

Streetwiseguy wrote:

PHeller wrote: then you are owner and you should be able to have some control over how much time you spend there.

That is some funny E36 M3 there, man. In a small service business, the owners paycheque is intimately tied to the number of hours spent working.

ABSOLUTELY!!

With 37 years ownership in a small service business, I'm amazed at how many people don't get this.

The most successful small shop I know is the repair shop I use. The best time for me to connect with the owner is before 5:30 AM. He starts at 3:00 AM 6 days per week.

In reply to Conquest351:

It sounds like a (possibly) good opportunity.

Figure the value of the tools, equipment, and building at 10% of FMV. Seriously.

The value of the business is in the ongoing customer contracts. If they've been berkeleyed, then so has the value.

Don't even THINK there is a way to work 40 hours per week. If that is your opinion, you will not succeed.

I'd also think REALLY HARD about a 50/50 split. I would NEVER enter one. 51/49, perhaps. If ultimately there is a disagreement, you need to know who will make the final decision.

The better plan would be that one of you is the clear senior partner (or sole owner) at 1 location, the other at the other. If you ever disagree, you can go your separate ways.

You could probably design a joint venture arrangement of some kind. For example- 2 different companies with different ownership, working together with the following goals/ details of the relationship...

Jump on it.

Don't delay an opportunity waiting for a wishful thinking.

If it took 6 months- 1 year for the second opportunity to materialize, there is a possibility your first opportunity could be ready to hire a manager or sell, if you work your butt off.

Can you find a place to rent for 6 months while you get the thing established? You're talking 20+ hours/wk in the car it sounds to me, and that's time better spent in the shop. A few grand for rent in an efficiency apartment (to say nothing of gas) is small potatoes compared to the possible long term benefit.

In reply to stroker:

Think you missed this:

Conquest351 wrote: The place in Austin to stay is my moms, so no rent or whatever.

SVreX wrote: In reply to stroker: Think you missed this:

Conquest351 wrote: The place in Austin to stay is my moms, so no rent or whatever.

My bad. I read that differently.

I would suggest partner buys both and you immediately buy 2nd from him so you each own one shop outright.

You can certainly work together to help each other out, but when the rubber meets the road it is better to make decisions as a dictator than as a partner.

My best friend spend 30 years buying out four lazy useless business partners. They sucked profits the entire time then got a check....

Just got home from visiting Austin and both shops. Here's what we have decided.

The current owner of shop #2 still thinks it's doing OK. It's clearly not. I showed up on a Saturday and there were 2 cars in a 16 bay shop. My friends shop (shop #1) was equally as slow. Shop #1 is not in an ideal location. It's in an office/commercial park and it's not easily seen from the road. Shop #2 is directly off the highway. Here's our plan as it stands. He is buying shop #1, getting everything done as we speak, it's a done deal. We are going to focus on that shop for the moment, get it up and running well and start making a decent profit. Put the money aside for shop #2 and watch as it declines and the owner basically comes to us since we have expressed a serious interest in it. Once that happens, I will take over that shop as my own. We will both be working under a common company name, but 2 completely different shops who are supporting themselves. This way, if one of us happens to crash and burn, it will not hurt the other.

I have told him about my other opportunity and this start up or ramp up time is giving me the opportunity to get more answers on the "dream job" we'll call it. Right now I can go down to Austin and spend 2 days a week each month going out and building a client base with other businesses generating a fleet maintenance business. This is what was decided over dinner and beers last night. Doing this, I will not jeopardize my current job and the reimbursement to me will be minimal, but the rewards and potential profits will be great (we hope).

Instead of taking a manager paycheck, I will invest most of it back into the company building that cash we need to purchase shop #2 without an investor or small business loan. We both talked and agreed on this last night as well. I do like the 51/49 split idea. I believe giving him majority shareholder control would be ideal because this really is his baby, and final decisions should be his.

I will let you guys know what else happens as it does.

Thanks again for all your input, I knew I could count on you!!!

Conquest351 wrote: Shop #1 is not in an ideal location. It's in an office/commercial parkfull of people who would love to have a trustworthy garage in such convenient proximity to their place of work

i think i'd remove the not. and i think i know where i'd advertise.

Conquest351 wrote: Instead of taking a manager paycheck, I will invest most of it back into the company building that cash we need to purchase shop #2 without an investor or small business loan. We both talked and agreed on this last night as well. I do like the 51/49 split idea. I believe giving him majority shareholder control would be ideal because this really is his baby, and final decisions should be his.

I like this strategy. It allows you to each do what you do best. You get to continue your current job or a potential opportunity in the future while still benefiting from owning the shop.

In reply to AngryCorvair:

Great point. Since getting a job with "normal" hours, any place with banking hours will not get my business.

How are you guys going to differentiate yourselves? Specialists in certain brands? Certain services? Can you stay open an hour later than your competitors, or open on Sundays?

AngryCorvair wrote:

Conquest351 wrote: Shop #1 is not in an ideal location. It's in an office/commercial parkfull of people who would love to have a trustworthy garage in such convenient proximity to their place of work

Exactly what I was thinking. i think i'd remove the not. and i think i know where i'd advertise.

AngryCorvair wrote:

Conquest351 wrote: Shop #1 is not in an ideal location. It's in an office/commercial parkfull of people who would love to have a trustworthy garage in such convenient proximity to their place of work

i think i'd remove the not. and i think i know where i'd advertise.

I believe they already have that client base, there is a used high end luxury car dealership just around the corner from the shop who has the shop do all their maintenance and repair work. So there's that. LOL I think having myself spend days on end visiting and shaking hands with business owners and office managers (who really run the place) will pay off in spades.