# I have a dilemma before me.



## ET1 SS (Oct 22, 2005)

I have a dilemma before me.

I ask for your thoughts.

There is a local motor rewind shop, operated by an elderly man [Sam] who is 'semi-retired'. I have spoken with Sam and he has expressed a desire to sell out and move to a retirement community.

Sam rebuilds automotive generators, alternators and starters.

Sam only stocks American made units.

Sam gets them from the 'bad' cores turned in when he sales a re-built unit, and he gets old units from wrecking yards. He takes them all apart and ultra-sonic sink cleans the case. He cleans, inspects and tests each coil. Then he reassembles each unit, by replacing the bearings, the clips and brushes. He runs each unit on a dynamic test bench to make sure that it works correctly, and finally giving the completed rebuilt unit a coat of paint.

Sam is the only guy doing this for a thirty-mile radius.

He only works four hours each day has no sign in front of his business, no advertisement in the phone book, and he does no advertising. He does not court any of the mechanics to get their business.

I have spoken with one of the local auto repair ship owners about Sam's business. Sam provides a much higher quality of product, at a much lower price, than is available from anywhere else. But his limited hours make it hard for the mechanics to use him.

Sam's shop has a big ultra-sonic sink filled with ceramic beads for cleaning parts, a kiln for baking the coils, a sand-blast cabinet, two metal lathes, an end mill, two brakes [one 40-ton press and one 20-ton press], and two benches with specialized test equipment.

Sam has never touches a computer as he has no computer. All of his stock is arranged on open shelves. You have to call him or come in, to find out if he carries the unit that you need.

I spoke with him yesterday, he is a cranky old guy, he goes from wanting to sell to not wanting to sell.

When I walk around Sam's shop, I see shoulder high piles of cores that have not been touched yet.

If I were to buy Samâs business I think that I would:

1. change the hours to full-time.

2. bring in a computer to get the inventory on-line [so customers can check his inventory and 'pre-purchase' a unit].

3. print out a sheet for each unit, listing all procedures done and the results of each dynamic test, and include that sheet in each unit's box.

I look around and I see an opportunity to make alternators into windmills and hydro-plants. With a huge pile of rebuilt units sitting around, I would like to play with making both forms of power generators, testing there actual outputs and marketing a line of cheap power plants.


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## DaleK (Sep 23, 2004)

I missed the dilemma. Don't know if you want to do it? Don't know if you CAN do it? Don't know if he really is ready to do it? Don't know how much to pay? Sounds like a good opportunity if you're ready to commit to it and he's ready to move on as long as he can help you make the transfer.


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## ET1 SS (Oct 22, 2005)

DaleK-
Sorry about that.

Yes I just do not know if I want to buy him out.

Or how much to pay him, I have no money set aside, he would have to hold a note or something.


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## mightybooboo (Feb 10, 2004)

Well its your lucky day,Ive actually been on the inside of this business.

Heres how it worked.Dick would buy the core of starters and alternators from the junkyard for 5 dollars.When he got his BIG stakeside truck filled he would drive them into L.A. about 40 miles away and sell the cores for 10 dollars.

When the cores were rebuilt he would buy product back from them for 20 dollars.

He then wholesaled them to auto repair places for 40 dollars.

The repair place would charge their customer 80 to 150 dollars or more for the part when they did the repair.

Note every time the part changes hands the price doubles.

So,Dick doubled his money on the cores,and doubled his money again when he sold the rebuilt to the shop.He kept a supply on hand at the garages to cover the most common items,and would refill their inventory when they told him they needed it,would see what they used,bill em at that point.Did that about every week or so,spent a day billing and inventorying.

What he offered the garages was a better price than the parts places ,usually 50% cheaper than Autozone or whoever could sell them for.His was so much cheaper because he didnt have a store and employess to support,just a garage at his house and himself.

Also,If the customer needed a part he didnt have,he would drive out to L.A. immediately and get that part,within 4 hours of the call it was delivered.He might even lose money on those deals,but more than made up for it with the business volume he did.

Out here,the major junk yards figured out they could sell to the rebuilders and froze him out on that end.

Even so,he worked,yep,4 hours a day because thats all it took and it wasnt hard work at all.
Was making 50,000/year when he died back in the early 1990's.

I delivered and picked up parts for him at times.

Was a SUPER business.


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## Ross (May 9, 2002)

> Sam provides a much higher quality of product, at a much lower price


 Well Sam's dilema is going into business to not make money, so lets hope he has a realistic price for the biz if he sells! Did you want a new full time job?


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## OntarioMan (Feb 11, 2007)

So exactly how much money does Sam make? Exactly how much money does he spend? (that whole "income and expense" thang that is common in business)


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## ET1 SS (Oct 22, 2005)

Ross- True.
Sam started up this business, just so he would have something to do when he was not up at his camp. He could live in town and take a week off each month to be at camp. It supports him in his lifestyle. He is happy with it, and only now in his late 70's is he thinking of moving to Florida.



Ontarioman- Sam has no idea of how much he Grosses or Nets. He mostly does a cash business.

He keeps no regular books, and hires a local tax guy to file for him using the numbers that show in his checkbook. Walk in business mostly pays in cash, though he takes a lot of IOUs. Most businesses in this area take IOUs. [I have never written an IOU, but I have been offered that I could if I needed to]

I worked in a store as a teenager that ran like that. Later my wife bought and operated a laundromat that had been operating in this manner, before she bought it. Then at a later duty station, after my DW got her accounting degree, she bought a catering business that also had been operating in this manner. 

While we maintain meticulous books on our apartment buildings, we do know other landlords who keep no books outside of their checkbook. They merge funds between business and personal, so it does make the issue cloudy.

Back when I was taking the IRS courses each year through VITA, I filed taxes for businesses that operated in such a manner.


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## ninny (Dec 12, 2005)

If you do decide to buy this operation, a few words of advice.

Take checks only from people that you know and trust, otherwise, cash when they walk out the door with the part in their hand.
Be prepared to spend more time than you now have in mind on the business. 
You're gonna get the phone calls at home on weekends, nights, holidays and every other time imaginable.
Be prepared to deal with irate customers," this piece of junk you sold me ain't no good, don't matter that I hooked it up wrong." 

I've been there and done that.

Other than that, have fun and I hope you make some money.

.


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## ET1 SS (Oct 22, 2005)

ninny said:


> If you do decide to buy this operation, a few words of advice.
> 
> Take checks only from people that you know and trust, otherwise, cash when they walk out the door with the part in their hand.
> Be prepared to spend more time than you now have in mind on the business.
> ...


Thank you.

Anywhere else and I would agree entirely; having owned a laundry-business, a catering business, four apartment buildings. Right now we still have one apartment building and a Farmer's Market stall.

However If I do not take checks, I would be the only guy in town who did not take checks. Everyone in this town even takes out-of-state checks.

I am still very hesitant to take IOUs, but most businesses here take them. I have never asked, but business-men here have offered to me that they are willing to take a personal IOU.

Sam does not currently spend any more than four hours each day in his business.

He does not give out his home phone number, he locks the door and he walks away at noon each day. I do not know if he even has a home phone.

I do thank you for your advice, though in this small rural Maine town things seem to be a slight bit different.


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## WisJim (Jan 14, 2004)

I know a fellow in our town that has a similar business. He has limited hours open, keeps a reasonable assortment of starters, generators, and alternators on hand, has reasonable prices, etc., and seems to do a good business. However, his wife also works full time at a job that has good health insurance and retirement plan, so he doesn't have some expenses that other people might have in a similar business. Can be an interesting and usefull business to have.


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## ET1 SS (Oct 22, 2005)

WisJim said:


> I know a fellow in our town that has a similar business. He has limited hours open, keeps a reasonable assortment of starters, generators, and alternators on hand, has reasonable prices, etc., and seems to do a good business. However, his wife also works full time at a job that has good health insurance and retirement plan, so he doesn't have some expenses that other people might have in a similar business. Can be an interesting and usefull business to have.


This guy is late 70's so I assume that he has medicare. He is single and lives by himself. I do not know what other incomes he may have.

I am also retired with a DOD pension coming in, so I do not need such a business to support me or my household.


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## Ross (May 9, 2002)

My brother wanted to set up this kind of business to work part time at. I suspect it was the cost that has stopped him as he'd have to start from scratch even sourcing parts!! I do think its a good business to get into though.


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## wy_white_wolf (Oct 14, 2004)

The guy I know in this business is only open 4 hours a day. Not because he isn't there. If he didn't shut and turn off the phone he could never get anything rebuilt. Some of the operations needed for rebuilding are not condosive (sp?) to interuptions. If you are going to be open a full 40 hours a week you will either need someone to man the phones or plan on living there in the evenings to work when you have no interuptions.


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## 12vman (Feb 17, 2004)

Sounds like a great venture! You might consider offering Sam some kind of position within the business to allow him to feel part of the action and maybe learn some short cuts on the processes yourself. He may like this situation and feel more comfortable about selling..

Good luck..
~Don


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## driftwood (Jun 29, 2013)

i would suggest,,you offer to help or job shadow him,,slowly at first,,he may gro to like you and train you and in a year or two sell you the biz........you may decide you don't like or have the same nack that he does for the work..


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## Gray Wolf (Jan 25, 2013)

Automotive alternators are not all that great as wind or hydro units. Look into it before you plan on that as a part of your business plan.


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## simi-steading (Sep 27, 2012)

ET1 SS said:


> DaleK-
> I have no money set aside, he would have to hold a note or something.


This is usually a problem when buying a business... and if he did hold the note, what happens when he dies? Will the family come in and take it to liquidate for what little they can get?

Also, if he holds the note, what are you going to do to cover overhead?


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