Business #8 came as a referral. The owner wanted to sell his sign business because he was tired of the struggle to make payroll every two weeks. The business was similar to business #1 in that it manufactured and installed signs. I had long since vowed to stay out of the manufacturing side of the business after I started business #2. I much prefer the wholesale business of installation because it is easier to manage. Out of curiosity, I reviewed the numbers and was not initially interested in buying the business. However, the business did have some juicy contracts and it did not have sufficient working capital to complete them. Intrigued by these contracts, I offered to loan the company working capital at 18% while also helping them manage the cash flows.
In the back of my mind I knew I should not be getting into the sign manufacturing business again, but the creativity and showmanship of it is very alluring. There was also the draw of feeling needed and utilizing the many years of experience I had in the industry. If there was someone out there that could save this business, it was me. Whether that was possible or not is a different story.
The business was creating a niche in historic theatre renovations. From a sign guy perspective, these jobs are the Big Leagues. They are almost up there with the casino signs in Las Vegas. These projects are the cornerstones of huge development projects and the signs definitely take center stage. The signs all required extensive research and design and needed a big budget to pull off. However, it is quite a rush on grand opening night to flip on the lights and see the excitement.
In spite of the exciting work, management and the owner were not getting along. The owner would meddle with the production schedule to meet his personal customers without regard to the big picture. The owner was a small, hand-to-mouth operator and the business had outgrown the his vision and expertise. The manager and talented designer wanted to continue to pursue more historic signs in far away cities. The owner wanted to focus on doing small retail signs for strip malls, the jobs he had done his whole life.
The company discord and problems were placing my investment at risk. To solve this problem I converted my debt to equity and bought out the owner outright. We completed many challenging projects, but without the financial results I had hope for. Project management and cost overruns are serious challenges in this highly custom business. Fit and finish had to be near-perfect. We would burn many hours at the end of the projects detailing the displays so they would shine. No one looks at there electrical panel, but everyone looks at the sign. The “dollars and cents” of it was I could make better margins installing pumps, panels and air conditioners, all with less headache and risk. I eventually finalized a sale of the company to existing management and we all hope for a happy ending.
Keys To Success
- Don’t repeat your mistakes
- Don’t try to be a hero
- I know this is repeated every time, but if you lend money have an exit strategy