Starting custom woodworking business with friend, need some feedback

[Guvner]

So my friend and I were chatting last Friday over our normal Friday night beers at his place and we got talking about when he was working for a local custom woodworking business and just how much fun he had at it and the potential it had before the owner closed up shop. He said how much he would love to get back into that work because he clearly had a passion for it, but the start up costs were a deterant. Now being curious and the fact that I hate my job and want to get into a skilled trade I posed more questions on the field and costs and such and before you know it our harmless conversation turned in something serious and exciting.

So here I am doing some research on the idea of us going into business together by reviving his bosses old business. Now I'm not sure what details are needed so I'll just fire off some facts here.

The previous owner ran it for 17yrs and built a great rep for building high end custom staircases and other custom work like fireplace mantels, but always turned down constant requests for other custom work. The business ran 100% on referrals as he did not advertise all all, not even a name on the work van. He was as my friend called him a 'scatter brain' and knew nothing about running a business so he was constantly disorganized and inefficient, always priced jobs wrong so he ended up doing in for low profit, basically the business had lots of potential but because the boss was an idiot he never tapped into what was a monopoly for him. My friend worked for him for 4yrs from a shop hand to doing majority of the work and developed the skills where he feels confident that he would carry on doing what he did before, plus his old boss is available to help out. According to my friend when the shop closed up the owner was netting around $75K year, but that if he ran the business better there was a potential to make at least double that, he also owned the machinery and paid only $500/mth incl heat/elec for the shop, my friend was paid a lousy $12/hr and was the only employee.

My friend's background has been trades, and right now does general exterior renovations for someone else, he has the knowledge and skill to do anything renovation wise. Myself I've been an insurance broker for almost 6yrs and have hated it from the start so I'm looking for an out, I have been looking at the skilled trades, I have a good knowledge and experience with home renovation work. I've done all the renovations around my house which amounts to redoing almost everything, I have the ability to learn these skills fast and hone them quickly with experience, also I enjoy doing it. We do work well together, we have done hardwood flooring, roofing, drywall, etc together, whatever I am better at I lead that job, and vice versa for what he is good at or more experienced. We are both late 20's, he has 1 kid, I have none.
Finance wise neither one of us have money, my wife and I have a load of debt (mortgage and large line of credit), mind you at our current income level its certainly manageable. My friend and his wife always complain they have no money, but I don't know anymore than that. Managing money is something I have experience with having managed the family finances for a couple years so I have experience with that, my friend has none, his wife does that all. I have great credit around 730, he likely has lower credit judging by what he says, but again I know nothing more yet.
For startup costs this is the big obstacle, the machinery to run the business is expensive, now his old boss still has all the machinery stored away so its available. Cost wise to buy these machines from his ex-boss, tools, work van/truck would be about $75K, maybe less, this would all have to be financed.
My friend who still has contacts in the home building/renovation industry locally says there is a demand and that all the high end/specialized work is being sent out to big centers like Toronto, but thats 3hrs away. The fact that there is virtually no local competition does sound good.

I think my rambling is done. Thats what I know thus far and would like some feedback as to what direction we should go and any advice that could be offered.

Thanks!

[Desert_Star_Systems]

One approach would be to rent the equipment from his old boss.

Since you may or may not have the money right now you could also set up a contingency plan. You would pay more to rent the equipment; however, the old boss would be at risk of not getting any money. You would not be out of pocket the money until work comes in.


Just an idea...


Girlfriend's dad does this for a living and making quite a run at it for several years. His work has been featured in several industry magazines and he has quite a list of high profile clients.

[Guvner]

I was thinking of that, perhaps lease to own. If the business works out the rent paid could go towards the purchase. We will have to talk with him to see if he is even interested in doing that.