I have been offered the chance to buy a turnkey contract furniture business, specializing in laminate office tabletops. I’ve known the owner for about 6 years.

The assets are machinery, building lease at a favorable rate, and relationships with several large dealers with ongoing orders. 4 good employees.

Machines are beam saw, point to point CNC, large edgebander. All are European manufacture between 6-12 years old.

Historic revenue potential of $1.4M, however due to the market since COVID it’s been down to $600k and losing money.

Owner is asking basically the value of machines, and willing to self finance 60%.

Is this business salvageable given the current market for custom office furniture? I’d probably lay off 2-3 of the guys and hustle in the shop for a year just to get off the ground.

Looks like the existing equipment could be used to fabricate frameless cabinets pretty efficiently. Don't know anything about office tabletops, but if I had such offer and could afford it I would get it for making cabinets.

Oggie, that had crossed my mind and aligns with my idea of starting an RTA shop. Seems like a risky move to jump into the slow commercial market now, especially with an annual operating cost of about $400k. The owner was forthright that there are no open orders for Dec/Jan, and even with the employees laid off that is an immediate $20k hole to dig out of.

I had assumed the machines were a bit newer, but when I inquired yesterday, the only machine that is not fully depreciated is the edgebander (2017). Beam saw and CNC are 2001, which puts their value at basically nil. I'm not afraid of old machines as I've refurbed two obsolete CNCs with new controls, still, there is the looming threat of downtime.

What is the asking price? No orders for Dec and Jan? Any orders after that or did the business stall out and you would be trying to revive it?

6-10 year old equipment is worth Pennie’s on the dollar. Why is the business down? What’s your plan to revive it? What can you do to improve the business? What kinds me of revenue does the business bring in? How profitable is it/ how big a loss is it having. How much capital do you have to sustain losses until you make it profitable? Who “owns” the knowledge of the process? The owner, the employees? Does he currently sell direct to consumer or through dealers? Is there room for improvements in the process that can greatly improve product or the process?
Like I tell my wife, just cause it’s on sale doesn’t mean we need to buy it!

I'm not going to buy it. I haven't seen the books yet but my back-of-napkin math isn't pretty.

The lack of orders was because the owner refused them as she wants to retire by EOY. Even with those orders, I don't see the office furniture market rebounding quickly, and my pockets aren't deep enough to bankroll the business for even 6 months.

It sounds like you have a solid understanding of the business and its current situation. While the market has been challenging due to COVID, the assets and relationships with dealers could provide a foundation for growth. However, it's essential to thoroughly evaluate the market conditions, the potential for revenue recovery, and your ability to turn the business around before making a decision. Additionally, consider the impact of laying off employees on morale and productivity, and ensure you have a clear plan for revitalizing the business.