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Buying into an established security company, good or bad idea?

IrishRookie

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#1
Hello all, It has been a while since I've posted here, hope you're all keeping well.

Now down to business, I personally know a couple of guys who post on here and I will try to touch base with them offline to see if they can offer any input but I also know this website harbours many an experienced security operative as well as company owners in the industry. Due to many of you being in the game decades your experience and advice is always appreciated, so I thought I'd run this one by you lot and see if you could point me in the right direction.

I have been asked if I would be interested in buying into an established security company, it's a small company of between 30 and 40 employees and the offer was only brought up in conversation recently as I was chatting to the owner about my intention to start a small security/cleaning service company.

I've started my research and due diligence into the company today, most financial and company statements are available to the public for a charge if you know where to look and the company appears to be profitable although not hugely and the salaries of the Directors appear to be modest but then there's always scope to grow and improve the service and as a result the financials.

The company is in existence about 10 years, it has survived the recession and appears to have the potential for continued growth, the company has seen a small financial increase over the last 3 years.

The main sectors the company operates in at the moment are retail and static and the odd event.
The salaries of the Director(s) appears to be about 5% each of the gross cost of running the business with a small annual profit equivalent to about 25% of that salary.

The Pro's versus starting my own company from scratch is, it's already established and has active contracts, it has an established brand although not widely known, the owner is a good guy from what I can tell and he works hard, I've worked a few gigs with him over the years, he's open to the idea of expansion and entering complimentary sectors.

The cons, "the unknowns" parachuting into a company that already has a long established culture and the possibility for company culture, expectation/personality clashes that may make it unworkable, risking capital investment, a huge time commitment at least for the first few years and possibly ongoing.

I've haven't been in this particular situation before so I would appreciate if any of you had any insight or experience in this area, what questions would you ask besides asking to see the accounts/financial statements, what other considerations would you be thinking about before jumping in?

Looking forward to any opinions at all.

Cheers, IR.
 

protectasia

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#2
First impressions and a brief opinion, pouring money into your own start up is not guaranteed to work either. You may have months on your ass before you can draw a living wage.

This way you get an income, you may have been brought onboard to add a different dimension to the business that you can help grow to bigger things.

Just ensure you think your stake is fair,potential earnings are fair, get some legal advice on the agreement and then make a decision. From what you say its worth looking deeper at least.
 

IrishRookie

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#3
First impressions and a brief opinion, pouring money into your own start up is not guaranteed to work either. You may have months on your ass before you can draw a living wage.

This way you get an income, you may have been brought onboard to add a different dimension to the business that you can help grow to bigger things.

Just ensure you think your stake is fair,potential earnings are fair, get some legal advice on the agreement and then make a decision. From what you say its worth looking deeper at least.
That's a good point protectasia re: immediate income compared to the initial slog of a start up.
I'll look into it further but I'm not sure what questions would need answering other than the usual such as is the company fully legally compliant, and what are the financials like. Thanks for the reply
 

Gi0vanni2

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#4
Lost contracts, what were they lost for and against whom.

Staff turnover and recruitment.

Overall overtime paid and sickness levels.

Technology already applied to the resources and room to improve.

Assets (offices, vehicles, training facilities, external dependance for accountability insurance and training if able to improve and reduce cost "in house").

One nice touch: years to recover your investment in the worst case scenario of not being able to improve the results versus starting from 0 and adding another competitor to the local market.
 

premier

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#5
IrishRookie,

Giovanni has raised very valid points, you must look at the geographical impact you will have if you decide to be a competitor in the area, not knowing where in the world you are referring to.
I personally wouldn’t have a business partner ever again, partnerships do not work, there will be resentment from both parties and one will work harder than the other.
I have a successful company, I had a business partner and I got rid of him, sadly our friendship ended but it could of been much worse as it could of turned to physical conflict at the tensions got that high towards the end.
So I speak from experience when I say go it alone, furthermore I wouldn’t let anyone buy into a successful company who in their right mind would? Please also note “good will†value of contracts doesn’t apply to security as the client can and will drop a company like a hot brick if they can get a cheaper deal elsewhere and to the mix that this time last year people working for Carillon thought they had a golden ticket and they will be luck to get 1p in the £ from the receivers.

Regards

premier
 

IrishRookie

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#6
Lost contracts, what were they lost for and against whom.

Staff turnover and recruitment.

Overall overtime paid and sickness levels.

Technology already applied to the resources and room to improve.

Assets (offices, vehicles, training facilities, external dependance for accountability insurance and training if able to improve and reduce cost "in house").

One nice touch: years to recover your investment in the worst case scenario of not being able to improve the results versus starting from 0 and adding another competitor to the local market.
Thanks for that Giovanni, some good points and good questions to put forward.
 

protectasia

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#7
Premier, you make some good points and its always good to back it up with experience, the proof of the pudding in my books.

I do question one comment you make, its not that clear cut. You mentioned who in their right mind would let someone buy into a successful company? I understand what you say, but look at it this way too.

It happens often for the right reasons. Some business may want to expand, bringing someone in with core skills that are required but not yet possessed that are essential for growing the business.

I was invited (and accepted) to buy in to a company many years ago. I grew a sector of the business that they had no specialist knowledge in. It worked very well. I have since sold up (got more than my initial stake) and moved on to a different sector I liked the look of and wanted to pursue. I'll agree with you at times that partnerships can be challenging, but its also useful sometimes to have someone to bounce ideas of who see it from another angle.
 

premier

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#8
protectasia

I understand taking a company into a new sector may require new blood but if I was in the position of wanting to recruit in that case I would have made you a business development manager, as a BDM you would have been offered 20% share capital an agreed salary and based on your shares you would have received a bonus on the prorated basis.
As I think nobody in their right mind offers an equal share of a business, speaking from experience.
Alternatively we could have opened a new division of the company and kept the original company as a separate entity.

Regards

premier
 

Carl Dowd

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#9
You are faced Irish Rookie with the old age dilemma my friend... and I wish you well with both your determination and future...

CD (Former business owner 28 years)
 

Carl Dowd

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#10
Irish Rookie, I have read through your post once again and as I do have an interest in Business mentoring and matters? I would like to offer you a little further advice if that's ok with you..? It can be offered in one line and one acronym and from there you can do the Maths, if you have any questions then please do ask!

"There is one small question, just 5 words that drives all business investments. What's in it for me"

"F*ck-erm" [FCRM] - Financial Capital Risk Mitigation. Worth considering to save mass disappointment... CD 2186_52655650686_9080_n.jpg
 

colonel45155

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#11
First of all I have to say what a good post you have made, it was a pleasure to read.. I personally wouldn't buy into an existing company, ask yourself how hard it is to stick an ad on gumtree asking for SIA or PSA licensed guys to have on your contact list.

But what would I know, I'd prefer a hostile takeover with bangs and explosions and cars with guns coming out of the indicators. :)

C
 
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