So.....recession time!? | Page 7 | GTAMotorcycle.com

So.....recession time!?

gsxr guy said:
I signed for my first house at 2pm. Went to work at 4pm and got laid off. That was tough.
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Ouch. I know a few people that had that happen to them.

One of my buddies had the same. Signed for a house way over budget because the company was secure. The next day we were all told we're getting laid off in a staggered timeline. That sucked.

He's alright now but that was a tough year at the start.
 
Mad Mike said:
That would scare the crap out of me! Family businesses are usually successful because a sole owner drives the decision-making and customer relationships. In most cases, it's an iron-fisted setup, where the owner makes all the decisions on the things that can make or break the company.

Meddling children, their spouses, their role in the company can be incredibly challenging to manage, often overwhelming for the hired GM.

Hero to zero time can be measured in minutes if a family member becomes an obstacle. Ask the Ted Rogers clan.
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I know several small LECs that the owners want to sell but don't get offers meeting their expectations. The reason is that the owner is the face of the operation and when that face disappears so do a lot of the clients.

Long term employees may not like the new boss and quit. One electrician I know had customers follow him if he left an employer.

A friend has been talking about selling for a decade but he's a control freak and if retired wouldn't have anything to control. He's doing well so why sell for a year or two of profit if you can work another year or two and still own the company. Carrot on a stick.
 
nobbie48 said:
I know several small LECs that the owners want to sell but don't get offers meeting their expectations. The reason is that the owner is the face of the operation and when that face disappears so do a lot of the clients.

Long term employees may not like the new boss and quit. One electrician I know had customers follow him if he left an employer.

A friend has been talking about selling for a decade but he's a control freak and if retired wouldn't have anything to control. He's doing well so why sell for a year or two of profit if you can work another year or two and still own the company. Carrot on a stick.
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One of my old managers was like that. He'd start a company, build it up to something worthwhile, sell it, sign a 2 year non-compete so he can travel, chill and ski around the world.

1 day after the non-compete expired he'd start a new business, and all the previous suppliers and customers would rush over to his new venture.

Rinse and repeat. Guy was a control freak, and it's why I left, but he's good at what he does and is very successful.
 
nobbie48 said:
I know several small LECs that the owners want to sell but don't get offers meeting their expectations. The reason is that the owner is the face of the operation and when that face disappears so do a lot of the clients.

Long term employees may not like the new boss and quit. One electrician I know had customers follow him if he left an employer.

A friend has been talking about selling for a decade but he's a control freak and if retired wouldn't have anything to control. He's doing well so why sell for a year or two of profit if you can work another year or two and still own the company. Carrot on a stick.
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One I was hypothetically involved with was all excited about the "potential" and included that potential in their calculations. Price was more than 10 years profit and I disagreed with how the company was being run financially (~50% of money to owner, 50% split amongst all other employees). I thought a reasonable split would reduce the owners compensation drastically and therefore extend the payback period. Basically, from my pov, owner was screwing the employees and trying to win the lottery on the sale of the company. FMV was <40% of asking price and asking price was not negotiable. Also all the problems with face of the company and owner made sure that they were the primary point of contact for all important customers. Still hasn't sold many years later. May never sell unless the attitude changes.
 
Lightcycle said:
I've been through three downturns in my life.

Graduated university during the recession of the early 90s. Despite 2 years of co-op working experience, the only job I could find was over an hour's drive away and making peanuts. I made more as a student than I did when I graduated. Living hand-to-mouth meant no way I could afford a house.

Couldn't afford to buy a place for many years until the economy picked up. Went on every job interview I could apply for till I got a job that paid enough to save for a down-payment. My first mortgage was double digits.

Went on more interviews and landed a DotCom job and paid down the mortgage aggressively, while saving and investing. And then 2001 rolls around and I lost my entire life savings in the DotCom market crash, and my company announced a 50% Reduction In Force. I was fortunate to keep my job, but I had to work twice as hard to pick up the slack from the 50% that did get let go. Plus worry that the company would go under anyway, and I'd be stuck with an oppressive mortgage payment schedule with no income.

I didn't sleep much during that time.

Climbed back out again from that only to have my knees kicked out from under me yet again during the Great Financial Crisis of 2008. 50% haircut this time round. My company asked all its employees whether they would prefer a 33% RIF or a reduction in salary. No brainer, everyone took a salary cut, so once again, everyone was living lean during those times, while worrying that all these austerity measures would result in a layoff anyway.

Every generation faces its challenges. Back then it was high unemployment and high interest rates. These days it's high housing costs and stagnant wages. We've all struggled in some form or another.

Is there a recession coming? My Spidey-sense says yes.
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I worked my way through both of those, the late 80 saw booming returns, the early 90's crushed those and wiped out the gains.

Recession? Nobody has a crystal ball but I don't think we're going to see one in the next few years. First, we just slipped out of a short recession, the cycles between are pretty long so expansion will carry on for a while. I also see supply chain challenges and swelling nationalism in the US (which will follow here) encouraging investments into production and infrastructure, and the continued inflow of immigration will drive housing starts/renos etc. Massive infrastructure spending will keep people and factories going as long as there's mo and mo printed money sloshing around.
 
GreyGhost said:
One I was hypothetically involved with was all excited about the "potential" and included that potential in their calculations. Price was more than 10 years profit and I disagreed with how the company was being run financially (~50% of money to owner, 50% split amongst all other employees). I thought a reasonable split would reduce the owners compensation drastically and therefore extend the payback period. Basically, from my pov, owner was screwing the employees and trying to win the lottery on the sale of the company. FMV was <40% of asking price and asking price was not negotiable. Also all the problems with face of the company and owner made sure that they were the primary point of contact for all important customers. Still hasn't sold many years later. May never sell unless the attitude changes.
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If my buddy died his wife would inherit the accounts receivables, a bit of material and some tools, vehicles etc. Buddy is the only master electrician so all work would stop. Value = next to nothing, IMO a list of phone numbers. Contracts voided by inability to continue.
 
nobbie48 said:
I know several small LECs that the owners want to sell but don't get offers meeting their expectations. The reason is that the owner is the face of the operation and when that face disappears so do a lot of the clients.

Long term employees may not like the new boss and quit. One electrician I know had customers follow him if he left an employer.

A friend has been talking about selling for a decade but he's a control freak and if retired wouldn't have anything to control. He's doing well so why sell for a year or two of profit if you can work another year or two and still own the company. Carrot on a stick.
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Who wants to buy a LEC today? There's too much expense in the infrastructure and too much risk that wireless technology will make them obsolete. I'm guessing most LECs have little opportunity for growth and a very big chance of declining revenue.
 
GreyGhost said:
One I was hypothetically involved with was all excited about the "potential" and included that potential in their calculations. Price was more than 10 years profit and I disagreed with how the company was being run financially (~50% of money to owner, 50% split amongst all other employees). I thought a reasonable split would reduce the owners compensation drastically and therefore extend the payback period. Basically, from my pov, owner was screwing the employees and trying to win the lottery on the sale of the company. FMV was <40% of asking price and asking price was not negotiable. Also all the problems with face of the company and owner made sure that they were the primary point of contact for all important customers. Still hasn't sold many years later. May never sell unless the attitude changes.
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The profit-sharing wouldn't be a big challenge for me any owner willing to give up 50% of their profits is being more than generous. A valuation can be tough on this type of business as there are lots tied up in assets. Network gear is expensive to buy and maintain, if it was new the profit:valuation things would be done by calculating goodwill then adding that to the value of assets.

I still think buying a LEC would be like buying a shoemaker in the 70's. A slow path to destruction unless there was a plan to morph the business.
 
nobbie48 said:
If my buddy died his wife would inherit the accounts receivables, a bit of material and some tools, vehicles etc. Buddy is the only master electrician so all work would stop. Value = next to nothing, IMO a list of phone numbers. Contracts voided by inability to continue.
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That happened to one of my clients. Owner died. He was the only one with signing authority. Couldn't access money in accounts, couldn't legally complete work in progress. Poof. :(
 
Mad Mike said:
The profit-sharing wouldn't be a big challenge for me any owner willing to give up 50% of their profits is being more than generous. A valuation can be tough on this type of business as there are lots tied up in assets. Network gear is expensive to buy and maintain, if it was new the profit:valuation things would be done by calculating goodwill then adding that to the value of assets.

I still think buying a LEC would be like buying a shoemaker in the 70's. A slow path to destruction unless there was a plan to morph the business.
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I'm not talking profit sharing here. I'm talking total compensation. I agree, profit sharing 50/50 may be reasonable. Company assets were almost zero. Only a few percent of the potential purchase price.
 
crankcall said:
So many small businesses are run by people that are pretty competent , make a good living , and have a steady following. However, they are often the net sum of the guy running it, he goes, it all goes.
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You talking about me? I conned a lot of people into thinking I was smart but most of it was 40 years of experience. Then someone asks me to show them the trick.

There's a trick to playing a guitar like a master. Just play as much as they have.
 
mimico_polak said:
What the hell is an LEC? Licensed Electrical Contractor?
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I know that acronym as Local Exchange Carriers -- the little private telephone companies scattered across rural Ontario. They used to have stupid valuations (most are monopolies), lately they are becoming as valuable as dust.
 
Evoex said:
Then today a family friend called and asked if i would be interested in taking over the day to day in their family business as their children are not up for the task/interested and they want to retire. Oy!
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Friend of friend thing but a super mega bucks dad realized his kids would destroy the family dynasty and had his big name associates from the financial community agree to run the show.

Pop died and the kids started suing for bigger allowances. Who needs it?

Now the experts are out of it and the kids are suing each other.
 
GreyGhost said:
I'm not talking profit sharing here. I'm talking total compensation. I agree, profit sharing 50/50 may be reasonable. Company assets were almost zero. Only a few percent of the potential purchase price.
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I was thinking about another line of business -- I have a public network background and LECs means something else to me.

I know 2 Licensed Electrical Contractors that operate small companies. The lead guy (owner) books and schedules jobs, manages the client and pays all the electrician's expenses (trucks, fuel, advertising, insurance, company tools etc). The electricians get 50% of their hourly billings and 10% on the parts they sell, he keeps the rest. I think this might be normal for these types of businesses.
 
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