Wrap Shop Offered Buyout by Poacher-Rival

LET’S REVIEW: IN “The Case of the Poached Egg”, page 48): Tommy Farmer, owner of Pleasant Ridge Wraps, was losing his top installer Edgar “Egg” Garcia, who was being lured away by wealthy and unexpected rival Pat Coyote, owner of a new shop in nearby Hyde Park. However, in “The Case of Egg’s Over-Easy”, Egg regretted the move to the new shop despite more money, so Tommy sought a way financially to bring him back.

To continue, dear reader, Egg returned to Pleasant Ridge Wraps for the same pay as before, but with a structured bonus also offered to the shop’s other lead installer and non-Prodigal son, Jim “Ham” Hampton. After five months, both were making nearly the amount Coyote had paid Egg in Hyde Park and getting closer. Yes, “Ham ’n’ Egg” were back and better than ever — having super-sharpened their skills while apart.
Ridge Wraps was dominating the high-end work, especially after a number of full wraps shoddily done by Egg’s replacement at Coyote’s shop were brought in for do-overs. Hyde Park soon found itself mostly doing partial wraps, often at a discount. Across town, Tommy Farmer certainly was enjoying his revenge.

After three more months of the same, suddenly a familiar Lamborghini Aventador rolled into Ridge Wraps’ parking lot. Out of the Ham ’n’ Egg-wrapped sportscar stepped Pat Coyote. Tommy, Ham, Egg and young Casey Williams — now back with the shop permanently, having decided college was not for her — huried back from the window to appear busy and disinterested as the one-time poacher entered.

“Hello, Tommy,” he said, halfway in a tone one would use to address a grade-school boy.

“Coyote,” Tommy replied flatly.

“If you’re not too busy, can we talk in your office?” Coyote asked. Tommy motioned him in.

Once inside with the door closed, Coyote said abruptly, “How would you like to buy me out?”

“Buy you out?” Tommy asked, though he’d undoubtedly heard every word.

“Yeah, buy me out,” Coyote repeated. “This business… turns out, maybe it’s not for me. I thought because I’m into cars and detailing, I’d give it a try as a side hustle—”

Thought you’d poach a ready-made superstar and cripple my operation more like, Tommy thought to himself, not changing his expression.

“—but I have to say you found a way to get Garcia back and make it work for both of you,” Coyote continued, nodding in deference to Tommy. “And now I’m left with not much more than decals in a shop outfitted with the best equipment and supplies.”

Tommy was already at the point where he was running overtime fairly regularly. He knew from Egg that Coyote’s wrappers lacked training but not the willingness to learn. If Coyote would accept something around only 4x the shop’s EBITA (Earnings Before Interest, Taxes and Amortization, the gauge being a company’s profitability and operational efficiency), which Tommy estimated to be around $200,000 — perhaps he could exact ultimate revenge with a takeover.

But… then again, if Tommy did not buy Coyote out, the poacher would continue to suffer the ignominity of playing second best to Pleasant Ridge and continue to bleed revenue through literally shrinking wrap jobs and discount incentives. That would be fun to watch, Tommy thought.

“Okay, yeah, let’s talk about this,” Tommy said. “You’ll put together something for me?”

“That I will, Tommy,” Coyote answered. For the first time, “Tommy” sounded directed at an adult.

As Tommy, Ham, Egg and Casey returned to the window to watch Coyote drive away, Ham finally ventured: “What the hell was that all about?”

Just as he started to speak, Tommy was seized by a fearful thought: If he didn’t buy Coyote out, Coyote might sell to someone else, some other real sign-and-graphics person… And of course, could he even trust Coyote — enough for this level of transaction?

Don B.
Cypress, CA

Consider Coyote’s offer. If fair, Tommy [should] discuss the opportunity with staff. Can it be a win/win opportunity for both Tommy and his staff? If so, do it.

Perry Y.
Kelowna, BC, Canada

Sounds like more research is needed. Do you want to inherit his space, lease, equipment and more importantly, employees? Do they share his values, or lack thereof? The culture of the shop is pretty important. Do you want to expand? This was not your idea; it’s his… so who will benefit more? After switching to [your line of work] what did he do? Poach your installer, and buy a printer, and he’s in the wrap and sign business — at your expense!

This requires a non-competition agreement to be signed at the very least. Enforcement of that would be a huge pain. Now, some savvy business people would see this glass as half-full, a great opportunity to get rid of a problem, and expand with some control over your marketshare, etc. For those folks, great! We need ambitious entrepreneurs! For us old cautious folks, we prefer to stay in our lane and fine-tune our operation. Both can work!

Armando A.
San José, Costa Rica

Tough decision. I would buy the Coyote shop if the equipment it has is going to add value to my shop; otherwise I would let Coyote’s shop continue on its way.

Cindy G.
Placerville, CA

I think that if I had the work and the business was growing, the prospect of acquiring equipment, supplies and willing, trainable employees would be very desirable. I would figure out what part of the floundering business would help in my business, then come up with a number that was fair. After that I would consider which possible new employees would fit into my business. I’m sure it took a lot for the owner to come face to face and ask about a buyout, knowing there were some slightly shady business practices previously. Taking the high road is always preferable. If my business was slow then I might have to let the seller know that I appreciated the first shot at buying his business but wish him well on the sale of his business and future endeavors.

Robert D.
Oakdale, CT

Let him hang, unless you want the equipment. If he sells to someone who is good, then you will be sharing the market with an honest competitor. If you feel your work and pricing are where they should be, the competition will improve your crew. If he sells to another know-nothing, then nothing changes, and you continue at the top.

Phil D.
Lindon, UT

I would buy him out at a fair price and tuck the business into mine. I wouldn’t want to run two separate shops. The purchase price would depend on not just EBITDA but also goodwill. For goodwill I’d be looking at his customer list. Does he have contract work or are all projects one and done? My guess is my offering price would be lower than what he wants, and if he doesn’t accept the offer then I’d be just fine with that.