WoodTek OEM, Woodworker's Supply, going out of business
- Thread starter smorgasbord
- Start date
You might be surprised at what “cost-cutting” steps a business owner might take once they have decided not to remain in business.
The employees might not be ignorant of those steps. Which might include not paying vendors, falling behind on rent, utilities, etc. Failing to maintain the physical structure of the building, etc.
So, if this was not a “surprise” business closing, then the employees might have some inside information that would preclude them from making a buyout offer.
Also, those buyout offers often include financing by the business owner. So the new buyers offer a modest down payment, and payout the balance over 10 or more years.
The current owner might not have confidence that the employees can make a go of this.
I knew a picture framer with two shops. One was making money. The other was loosing money. He decided to close the the unprofitable shop.
He listed the assets of the remaining shop as “including $XXX,000.00 in art and prints, “$XXX,000.00 in equipment and fixtures.”
When I went to the shop it was apparent to me what he had done. He had moved all the “dead” (unsellable) art prints to the shop that was for sale, and moved all the sellable prints from there to the profitable shop. He did the same with the moldings. And newer shop that was closing had the older equipment.
So he loaded the closing shop up with garbage to inflate the value, and took the good merchandise to the original store.
My point is, once a business owner decides to close a business, they are all about reducing costs and financial exposure. So vendors that for years got paid in 30 to 45 days, find that they are owed money for 90 to 120 days.
I personally would be reluctant to take on the assets and liabilities of a company with a planned closing. I would rather wait for the auction to buy what I needed to open the business again.
The employees might not be ignorant of those steps. Which might include not paying vendors, falling behind on rent, utilities, etc. Failing to maintain the physical structure of the building, etc.
So, if this was not a “surprise” business closing, then the employees might have some inside information that would preclude them from making a buyout offer.
Also, those buyout offers often include financing by the business owner. So the new buyers offer a modest down payment, and payout the balance over 10 or more years.
The current owner might not have confidence that the employees can make a go of this.
I knew a picture framer with two shops. One was making money. The other was loosing money. He decided to close the the unprofitable shop.
He listed the assets of the remaining shop as “including $XXX,000.00 in art and prints, “$XXX,000.00 in equipment and fixtures.”
When I went to the shop it was apparent to me what he had done. He had moved all the “dead” (unsellable) art prints to the shop that was for sale, and moved all the sellable prints from there to the profitable shop. He did the same with the moldings. And newer shop that was closing had the older equipment.
So he loaded the closing shop up with garbage to inflate the value, and took the good merchandise to the original store.
My point is, once a business owner decides to close a business, they are all about reducing costs and financial exposure. So vendors that for years got paid in 30 to 45 days, find that they are owed money for 90 to 120 days.
I personally would be reluctant to take on the assets and liabilities of a company with a planned closing. I would rather wait for the auction to buy what I needed to open the business again.
I think this is as simple as "it's too expensive".
Let's give them the benefit of the doubt ( I know, I know - but play along, huh) and assume vendors are squared, lease is paid up (bet Ms. Wirth owns the building anyway) and all that's outstanding is the quarterly payroll/pension contribution. I'll bet inventory is low, but let's say it's $1m.
That makes the rest of it $2m and what would I get for that ??? A website, and a customer list, plus a name ? Mmmmm, tasty [unsure]
How much profit do y'all suppose they've made each year for the last few years ? Std. back of the napkin math would tell you it's roughly $1m based on the asking price. I'll bet ya the down payment that's not case. If it were, it'd be easy to find a qualified operations guy from outside to man the helm while a buyer was found. There'd be plenty of $$$ to throw at the problem.
Let's also assume the business is profitable but only throws off $50-$100k at the end of the day. That's not a bad haul for a small family operation, especially if the business is paying the mortgage for the building - but it doesn't support a $3m price tag.
At the end of the day it's just like an $12 orange - it's good, lots of people like em, but not worth the asking price.
Let's give them the benefit of the doubt ( I know, I know - but play along, huh) and assume vendors are squared, lease is paid up (bet Ms. Wirth owns the building anyway) and all that's outstanding is the quarterly payroll/pension contribution. I'll bet inventory is low, but let's say it's $1m.
That makes the rest of it $2m and what would I get for that ??? A website, and a customer list, plus a name ? Mmmmm, tasty [unsure]
How much profit do y'all suppose they've made each year for the last few years ? Std. back of the napkin math would tell you it's roughly $1m based on the asking price. I'll bet ya the down payment that's not case. If it were, it'd be easy to find a qualified operations guy from outside to man the helm while a buyer was found. There'd be plenty of $$$ to throw at the problem.
Let's also assume the business is profitable but only throws off $50-$100k at the end of the day. That's not a bad haul for a small family operation, especially if the business is paying the mortgage for the building - but it doesn't support a $3m price tag.
At the end of the day it's just like an $12 orange - it's good, lots of people like em, but not worth the asking price.
Having owned more than one business and watched quite a few people buy existing businesses it is one thing to run an existing business and another thing to expect that existing business to fund the finance needed to buy it. Financing three million dollars takes a lot of ongoing cash flow but most people just see a functioning healthy business that does not need to support that amount of debt.
smorgasbord
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Seems pretty well sold down, but there is a $6,000 lathe for $1,000 now. I don't have the space...
luvmytoolz
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Mini Me said:
I dunno if a Woodworker shop in the States == one in OZ. Maybe someone from the States can confirm this, but from what I see on forums a lot it appears many people buy stuff, open it and use it for a month or so, and then decide they want something else or just change their mind, and the shop is expected (obligated?) to take it back for a refund even though there's nothing wrong with the unit.
If you do have to factor that in, it would make buying an established shop that little more risky I would think. In OZ not so much cause change of mind generally isn't an option unless it's returned unopened pretty quickly after purchase, although Festool do have that 30 day option.
There's plenty of money floating around looking for a return that's better than "elsewhere" these days. If the financials remotely made sense I'm certain a budding VC would be all over this to streamline and then plump up for market in a few years.
No real estate in the deal tells me pretty much all I need to know even before looking at the P&L statements.
Kinda like festool, huh ?
While it certainly could be a PIA, it's not what's keeping this from being sold. You can offer that type of return policy or not. Woodworker's used to be 90 days ! [scared] It's just another cost of doing business like warranties, "free shipping :
or loyalty programs. Similar threads
