Massive upscale - How to plan?

[KingRichard]

I've been presented with an opportunity to buy the largest taxi operator in the area. So I have a choice between buying the competitor and entering a world of unknown problems, or investing/seeking investment in my own firm and aggressively taking their market share.

The good news is that my current operation is at the stage where I only have to worry about the positive things. I've dealt with all the big problems and I basically sit here plotting how to get more business.

I've sorted out all the issues with cars, drivers, phones, we've got a great loyal customer base and a healthy set of accounts.

So why am I tempted to buy a big chunk of turnover for no guaranteed quality? My Dad warned me this would happen

Anyone have any experience of kicking arse in this situation? I've got some lush opportunities available but I'm going to need to commit an awful lot and I'd like some encouragement / cautionary tales to help me make a decision.

Regards
Dave

[Ash 996 GT2]

KingRichard said:

I've been presented with an opportunity to buy the largest taxi operator in the area. So I have a choice between buying the competitor and entering a world of unknown problems, or investing/seeking investment in my own firm and aggressively taking their market share.

The good news is that my current operation is at the stage where I only have to worry about the positive things. I've dealt with all the big problems and I basically sit here plotting how to get more business.

I've sorted out all the issues with cars, drivers, phones, we've got a great loyal customer base and a healthy set of accounts.

So why am I tempted to buy a big chunk of turnover for no guaranteed quality? My Dad warned me this would happen

Anyone have any experience of kicking arse in this situation? I've got some lush opportunities available but I'm going to need to commit an awful lot and I'd like some encouragement / cautionary tales to help me make a decision.

Regards
Dave

We may be similar in our aims.

I got someone in to help put proceedures in etc so that when it comes to taking over another company we just map them onto that company.

Not done it yet, hopefuly sometime soon.

I have been warned that people do not like change and that I think will be the biggest hurdle.

[jamesuk28]

All I can say is, I have followed a few of your posts in the past, your obviously a clued up guy so I am sure you will do whats best. If it were me I would favour the agressive takeover. But whatever you go for best of luck.

[phoenixblend]

+1

Some of the things we were talking about the other day made me think "this person know business". I think you should be telling us

[GreenV8S]

From the sound of it your best bet would be to grow your own business and drive theirs into the ground. That avoids you giving your hard-earned to anyone else, and avoids any potential TUPE related nastiness, and avoids you buying a business which you (presumably) know is inferior to your own and trying to fix it.

[ukvoyager.info]

I really enjoy business growth.

For the last 6 years I was with a a business that grew from < 500k turnover to 35m pa, basically doubling year on year. As you can imagine that level of growth is very hard work, stressful and takes a sound business with good people to succeed but it is very rewarding.

Because of that I couldn't imagine working/running a business that wasn't on a sharp incline in growth. I always want the bigger contract, more work, new products and new markets. It drives my business partner mad as I am always coming up with crazy schemes, only some of which we implement.

So... back to the OP, if it was me I would go for it and look at starting up a courier company at the same time! I guess it depends what floats your boat.

My only other point is something Heraclitus once said: "Nothing endures but change".

[phoenixblend]

ukvoyager.info said:

I really enjoy business growth.

For the last 6 years I was with a a business that grew from < 500k turnover to 35m pa, basically doubling year on year. As you can imagine that level of growth is very hard work, stressful and takes a sound business with good people to succeed but it is very rewarding.

Because of that I couldn't imagine working/running a business that wasn't on a sharp incline in growth. I always want the bigger contract, more work, new products and new markets. It drives my business partner mad as I am always coming up with crazy schemes, only some of which we implement.

So... back to the OP, if it was me I would go for it and look at starting up a courier company at the same time! I guess it depends what floats your boat.

My only other point is something Heraclitus once said: "Nothing endures but change".

Wow - You've made me look forward to my early morning networking breakfast tomorrow - I'm going to network them so flipping hard....





...It seems I'm easily over motivated.

[davidd]

What is the deal for the other operator? How much profit, growth do they have, etc, etc.
What are their staff like, how loyal are their customers.

As I'm sure you know buying another business always has an element of pain, it might be much easier just to take their custom, drivers etc, etc.

Be interested to see how you progress..

D

[KingRichard]

davidd said:

What is the deal for the other operator? How much profit, growth do they have, etc, etc.
What are their staff like, how loyal are their customers.

As I'm sure you know buying another business always has an element of pain, it might be much easier just to take their custom, drivers etc, etc.

Be interested to see how you progress..

D

Firstly, thanks for all the replies! Especially the ones blowing smoke up my arse. They made me feel gooooooooooooooooood

I've only had a brief chat so far - well, four hours in the pub! I'm yet to see his accounts, but being a Taxi company there is an awful lot of stuff happening beyond the green baise door (The red squirrel has entered the observatory, are you grey squirrel? Etc...).

I've got an invitation to send people in to work there undercover and see what's going on. I couldn't do it myself as I'm too well known.

Basically it looks like it will cost us approx £60k upfront (which we could presumably raise from the equity in the assets - The cars), then a structured buyout over 24 months at £10k a month. Just rough figures we've discussed.

So basically £300k.

Question is, firstly could I raise £300k on my own business within 2 years, and what could I achieve if I had the money? Could I build a profitable multi-million pound a year business?

There's probably something wrong with the other firm. Why would you sell a cash cow for a fraction of it's value? I know he can't show the true value through his books. It was the same with the firm we bought, but you just wouldn't flog it at the peak of it's powers for bugger all (In reality, £300k is naff all for a good few million in turnover). He has a very complex business model. He always owes his workers around £1k to stop them moving on or taking holiday, which I think is appalling, but hey, it's not my business.

It sounds like it's in a bit of a pickle, but a profitable pickle.

Who knows? That's why I could do with a little bit of help weighing it up. I've got so much going on in my head!

[KingRichard]

Ash 996 GT2 said:

KingRichard said:

I've been presented with an opportunity to buy the largest taxi operator in the area. So I have a choice between buying the competitor and entering a world of unknown problems, or investing/seeking investment in my own firm and aggressively taking their market share.

The good news is that my current operation is at the stage where I only have to worry about the positive things. I've dealt with all the big problems and I basically sit here plotting how to get more business.

I've sorted out all the issues with cars, drivers, phones, we've got a great loyal customer base and a healthy set of accounts.

So why am I tempted to buy a big chunk of turnover for no guaranteed quality? My Dad warned me this would happen

Anyone have any experience of kicking arse in this situation? I've got some lush opportunities available but I'm going to need to commit an awful lot and I'd like some encouragement / cautionary tales to help me make a decision.

Regards
Dave

We may be similar in our aims.

I got someone in to help put proceedures in etc so that when it comes to taking over another company we just map them onto that company.

Not done it yet, hopefuly sometime soon.

I have been warned that people do not like change and that I think will be the biggest hurdle.

Hi Ash,

Are you larger or smaller than the company you intend to takeover?

Dave

[phoenixblend]

KingRichard said:

davidd said:

What is the deal for the other operator? How much profit, growth do they have, etc, etc.
What are their staff like, how loyal are their customers.

As I'm sure you know buying another business always has an element of pain, it might be much easier just to take their custom, drivers etc, etc.

Be interested to see how you progress..

D

Firstly, thanks for all the replies! Especially the ones blowing smoke up my arse. They made me feel gooooooooooooooooood

I've only had a brief chat so far - well, four hours in the pub! I'm yet to see his accounts, but being a Taxi company there is an awful lot of stuff happening beyond the green baise door (The red squirrel has entered the observatory, are you grey squirrel? Etc...).

I've got an invitation to send people in to work there undercover and see what's going on. I couldn't do it myself as I'm too well known.

Basically it looks like it will cost us approx £60k upfront (which we could presumably raise from the equity in the assets - The cars), then a structured buyout over 24 months at £10k a month. Just rough figures we've discussed.

So basically £300k.

Question is, firstly could I raise £300k on my own business within 2 years, and what could I achieve if I had the money? Could I build a profitable multi-million pound a year business?

There's probably something wrong with the other firm. Why would you sell a cash cow for a fraction of it's value? I know he can't show the true value through his books. It was the same with the firm we bought, but you just wouldn't flog it at the peak of it's powers for bugger all (In reality, £300k is naff all for a good few million in turnover). He has a very complex business model. He always owes his workers around £1k to stop them moving on or taking holiday, which I think is appalling, but hey, it's not my business.

It sounds like it's in a bit of a pickle, but a profitable pickle.

Who knows? That's why I could do with a little bit of help weighing it up. I've got so much going on in my head!

I don't know what the cities taxi industry is worth but if this sees you taking a monopoly of it for £300K than I should have thought it worth it. I often see companies try to expand too quickly which is gives the buy out more weight - IE buying a fully formed company should be safer than investing massive amounts in your current company. If you spent it on your own company what would the money go on? The other thing to think about is whether to bring the 2nd company under your brand or leave as is so you essentially compete against yourself (not always a bad thing - customers can choose between you and you!).

[JustinP1]

KingRichard said:

davidd said:

What is the deal for the other operator? How much profit, growth do they have, etc, etc.
What are their staff like, how loyal are their customers.

As I'm sure you know buying another business always has an element of pain, it might be much easier just to take their custom, drivers etc, etc.

Be interested to see how you progress..

D

Firstly, thanks for all the replies! Especially the ones blowing smoke up my arse. They made me feel gooooooooooooooooood

I've only had a brief chat so far - well, four hours in the pub! I'm yet to see his accounts, but being a Taxi company there is an awful lot of stuff happening beyond the green baise door (The red squirrel has entered the observatory, are you grey squirrel? Etc...).

I've got an invitation to send people in to work there undercover and see what's going on. I couldn't do it myself as I'm too well known.

Basically it looks like it will cost us approx £60k upfront (which we could presumably raise from the equity in the assets - The cars), then a structured buyout over 24 months at £10k a month. Just rough figures we've discussed.

So basically £300k.

Question is, firstly could I raise £300k on my own business within 2 years, and what could I achieve if I had the money? Could I build a profitable multi-million pound a year business?

There's probably something wrong with the other firm. Why would you sell a cash cow for a fraction of it's value? I know he can't show the true value through his books. It was the same with the firm we bought, but you just wouldn't flog it at the peak of it's powers for bugger all (In reality, £300k is naff all for a good few million in turnover). He has a very complex business model. He always owes his workers around £1k to stop them moving on or taking holiday, which I think is appalling, but hey, it's not my business.

It sounds like it's in a bit of a pickle, but a profitable pickle.

Who knows? That's why I could do with a little bit of help weighing it up. I've got so much going on in my head!

Here's my two-penneth.

I know a guy who works high up in British Gas. Bear with me, this has relevance!

Their margins are less than their competitors, despite the fact they have a big market share, and their market share is falling. New Gas Company A has their new systems, efficient running and can therefore advertise lower prices and run their business efficiently.

Despite British Gas trying to revolutionise and modernise it is a losing and costly battle. They have old billing systems which have cost tens of millions to make efficient, their structure has to be changed with redundancies each year, and when they do so they are being shafted as the old contracts included huge golden handshakes and final salary pensions with people effectively retiring on almost three figure pensions per year.

What I am saying is, although this company looks like a big ripe apple for the picking, once you bite into it you could find it is rotten inside and full of maggots. As you say, maybe this is why the guy wants to sell.

Here is an alternative, thinking out of the box. You are looking to fund this with £300k. Just think what *your* business could be like in a couple of years time if you invested that amount of money into it!

What does this company have which you don't?

Cars? You can buy them, or lease them and finance this in a much more flexible way.

Staff? If your company is growing and his is getting smaller, just poach them. That'll cost you a lot less than £300k even if you increase their salaries.

Customer base? As above, poach it. Remember, for him to keep that customer base he is having to advertise - you are still going to have to do that for his bit of the company to maintain turnover. Don't buy his company just to spend it on his, spend it on yours for the same effect.

Organisation/Admin? You have mentioned they are tied into contracts which are not good for the company and a complex business model. Adopting the perfect child is nice, adopting the kid from hell, just ain't and you really wouldn't want to pay for it!


Also look at flexibility. If you are looking to invest £300k into your own company you can do this as and when you have it. If you are contractually obliged to pay this at certain times to someone else, then you could be effectively risking not only the purchase of goods you don't know the quality of but also your core business.

I have read a few of your threads and commented on a few. You have skills and balls. Run him out of town. If you feel like buying him out, make the price less than what you can't get the same benefit for yourself. If you are growing and his business is reducing he is on the way out anyway. If you are feeling kind spend your money on your own company and buy his for £3k not £300k when it is worth nothing in two years time!

[KingRichard]

Hey Justin.

It's also a very rapid way into some extremely lucrative contract work. Stuff that's only tendered once every 5 years for example. The firm has been around donkeys years and is well respected.

The other thing is, I can almost immediately action a price rise of just over 10% on his cash tariff anyway... I know the market will take it because the same price rise on our smaller customer base was well recieved and we've got busier if anything. So maybe that will take the sting out of repayments a bit?

Our fares are actually higher than just about everyone in town, but we always come out cheaper because we aren't on a meter, and we know exactly what our drivers charge, whereas the hackneys at the competitor are quite at liberty to charge whatever they feel they can get away with (rightly or wrongly, it happens)

I could control all of that and transfer my business model over. That means everything is fair and above board to passengers and drivers alike. My drivers don't want to rip people off. In fact I know one of our drivers won't charge one old girl any extra (post price-rise), he takes a bit out of his share to cover the price rise for her. He knows word will get around and more people will ring us. We've got a great culture. It would just need transferring.

Thanks for your post. Good to hear from you

[Adam T]

Richard,

it sounds like you have an over active business mind, a little like myself - although my is more scatter brain! I can see you point regards these contracts on fixed terms - how do they work regards price uplifts with fuel prices and insurasnce costs etc? Presume you know when these are avilable to re tender? Have you ever looked on a web site called supply to Gov (or similar? - all councils are obliged to offer work through this site because of their procuremnt rules)

I think you will know yourself deep down what is the right choice. May be worth getting someone to actually put a value on his business to see if it is the right region - you do right though getting someone on the inside! Good move.

I can also see the other point from an outsider in the way that £300k will lease you a lot of cars, and people and additional advertising - could you set up in another town too?

Keep up the good work.

[KingRichard]

Adam T said:

Richard,

it sounds like you have an over active business mind, a little like myself - although my is more scatter brain! I can see you point regards these contracts on fixed terms - how do they work regards price uplifts with fuel prices and insurasnce costs etc? Presume you know when these are avilable to re tender? Have you ever looked on a web site called supply to Gov (or similar? - all councils are obliged to offer work through this site because of their procuremnt rules)

I think you will know yourself deep down what is the right choice. May be worth getting someone to actually put a value on his business to see if it is the right region - you do right though getting someone on the inside! Good move.

I can also see the other point from an outsider in the way that £300k will lease you a lot of cars, and people and additional advertising - could you set up in another town too?

Keep up the good work.

Hi Adam,

My name's Dave by the way

My thoughts at the moment are that it costs me very little to get extra work. We're lacking a bit in our night work compared to days. Maybe I should switch to single rate 24/7 or something

Anyway. That's where my next chunk of profit lies - Using the cars I already have at night. It just makes sense. They are paid for, insured etc and half of them sit in the car park at night

Trouble is, if you promote, you end up putting on more business all over. So the night work will still be out of proportion to the day work


Hmmm...

Or I could buy something where the owner went through this barrier 20 years ago...

Nice cars by the way... Are you a Zonda owner or just a fan?

[Mr POD]

Just a quick one : If you do decide to go ahead and take the risk, don't merge the 2 organisations. Make sure the new one can't bring the other one down by keeping it a separate entity.

[KingRichard]

Mr POD said:

Just a quick one : If you do decide to go ahead and take the risk, don't merge the 2 organisations. Make sure the new one can't bring the other one down by keeping it a separate entity.

I've thunk of that one. We'd incorporate Longleys, and then put the other business as a Ltd in a different family members name to keep it all as seperate as possible

[Mr POD]

KingRichard said:

Mr POD said:

Just a quick one : If you do decide to go ahead and take the risk, don't merge the 2 organisations. Make sure the new one can't bring the other one down by keeping it a separate entity.

I've thunk of that one. We'd incorporate Longleys, and then put the other business as a Ltd in a different family members name to keep it all as seperate as possible

I dealt with an automation company that set up a new ltd sister company everytime it had a project with serious penalty clauses. The new company bought consultancy, time, labour and rented use of machinery from the old company, but should the sh!t have hit the fan the MD would have lost nothing bar his reputation.