Starting My Own Business Versus Buying an Existing One

[eshortt]

Hey guys, I was wondering everyone's opinion on this. I've worked for a contractor for the past 6 years and am at a point now where the only advancement I can make is to buy the company or start over with a new one.

A bit of background on the company. We're a telecommunications installation contractor who pretty much caters to one telecom company. Our owner seems to be very much 'over' doing anything within the company and it is causing us to potentially lose our contract putting 10-12 people out of the job. As it stands, I'm the only person the client ever wants to deal with. Aside from all this, our hiring process at the moment consists of the owner asking if the potential employee can pass a drug and background check, and if so, they are hired. The owner also has an extreme diversion to firing anyone for any reason short of a felony. Through the grape vine, I've heard that we are on the verge of getting fired from our contract. The only thing saving us at the moment is that there is no one else to go to at the present moment.

So, knowing all that, my question is would it be better to go through the process of buying the existing company which I would estimate at about $500k or start a new contracting company from scratch?

From my standpoint the main bonus of buying would be that I could get through the process a little faster and I would be able to keep the owner employed until I could get my contractors liscence. On the other hand I would be a little worried that the company's drop in performance would have a stigma attached that I wouldn't be able to be rid of for quite some time. With starting a new one it would probably cost less to start from scratch as well as avoid any stigma.

[Fulcrum]

It wouldn't hurt to feel out the current owner and see if he's willing to sell. If he is interested, get him to name a price rather than you offer yours. If not, ask him directly if he fully understands the situation that you are seeing.

Out of curiosity, how did you arrive at the $500K price tag? If you would rather not say, I understand.

[Freelancier]

If you don't have a non-compete/non-solicitation contract in place, then there's no reason you can't leave and start your own business and end up landing that customer after they fire your current company. However, if you do have legal handcuffs on your ability to do that, then it's best to begin negotiations, but I certainly wouldn't put a high price tag on a business that's having trouble being run right.

[Harold Mansfield]

From my standpoint the main bonus of buying would be that I could get through the process a little faster and I would be able to keep the owner employed until I could get my contractors liscence.

This part of your plan bothers me. I understand needing to keep a licensed contractor around, but I'd want to get rid of the guy who's responsible for tanking the company as soon as possible. If you buy the company and keep him around odds are that he will not work for you and may even tank the company even more on the way out.

If you have a good relationship with your main client, you may be able to overcome the bad stigma of the old management but not if you keep the old management around.

[singhabhishek251]

I do not think you should buy any company which has bad reputation, but there you have a point to explain your clients that it has been taken over by you and the work will be better now.
if you think that the explaining will be enough, then you can go with them else starting new will be better if you do not want to risk with the bad name.
I would like to say that it depends on you as you can understand the things better their and we will be able to give your suggestions only based on what you have explained in short, so both ways you can go once you are done with the analysis.