What if someone offered to buy you a grinder

Stan Wilson

Stan Wilson

Joined
Apr 26, 2000
Messages
94
What would you do if,like me,you were a new maker and some one offered to buy you some equipment?So far I've produced six knives,five stock removal and one forged.I've given two away and sold two.One of the knives I sold was to a guy who owns a rather nice cigar lounge.Yesterday while I was picking up some cigars we got to talking,he wanted me to put some knives in his store on consignment.When I told my grinder was small and underpowered,limited in belt grits,etc.That I was profiling blades with a hacksaw,no buffer.In short doing a lot of the work by hand therefore I was slow and did'nt think it would be feasible.Then he dropped a bomb on me,he offered to set me up with some equipment.Here's the deal,he buys me some equipment,I make some knives,if he sells a knife for 200 bucks he takes 10% off the top towards the equipment then we split the rest 50/50.I would not be committed to making only knives for him,but if I sell a knife to someone,he asked that I give him 10% toward the equipment till its paid off.Just a few months ago I made my first knife as a challenge to myself,six knives later and orders for four more,and now an offer like this......?
 
How well do you know this cigar man, Rebos? I'd be careful with a deal like that. Put something in writing...I don't know. Sounds like a deal that could wind up in peoples court with Judge Judy.

Seriously. The split doesn't seem all that equitable. It sounds good to you because you get some new equipment. But, this cigar man will have his thumb on you for quite some time if he supplies you with good equipment. Sounds to me like you need to get a small business loan if you really can't afford the equipment on your own.

Not trying to put a damper on your deal. But, think about it. Say he sells one of your knives from his shop for $100.00. He takes $10.00 right off the top. That leaves $90.00. Then you split that 50/50. You just made $45.00 on a $100.00 knife. Are you kidding me? That's a 45/55 split. You'll get a better rate at any bank in the nation.

Just think about it. You're the maker. At least put something in writing to keep yourself safe from ruin. And remember the 'Pot of gold at the end of the rainbow thing'. There ani't no free lunch.

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M.Ogg

"It's better to be thought a fool and remain silent, than to open your mouth and remove all doubt"
 
rebos, i got started with the same tools you have now about three and a half years ago. remenber that your doing this be cause you love it! this is not a get rich quick plan. i labored and saved and finely got a hardcore grinder this week. man is it sweet! i put every cent i could back into the biz and have been full time for two years and it was worth the effort, i had simaler offers and i listened to my heart and passed, because this is my biz, well my dog is a slient partner! LOL, LOL

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Laurence Segal www.RHINOKNIVES.com
 
The others are right. Unless you put something down on paper, you will be paying this man on every knife you make for the rest of your life. Better to start small and build up to what you want than to have a life-long partner that you really can't get rid of.

Marcel
 
Rebos,

My first thought would be to thank him, but decline his offer. I know how I am about having someone holding something over me - after a while neither one of us would be happy. But maybe that's just me
wink.gif


If you do want to go with his offer, let me make one suggestion on the way the money should be split. To use your numbers, if he sells a knife for $200.00, he would get $20.00 towards the loan, and then you would split the remainder 50/50 - $90.00 each. But you are paying for all the materials!

A better way would be to deduct the costs of materials from the $200.00 - let's say $40.00 for this knife...
1/8" ATS-34 9" long = $5.00
Nice ironwood sclaes = $20.00
Belts, sandpaper, epoxy, heattreating, sheath, etc... = $15.00
Total $40.00

So now the $200.00 knife would net $160.00, the 10% paid on the loan is $16.00, and you each get $77.00 - not a big change, but it will make it easier for you to buy more supplies to keep making more knives.

Good luck,
Bob

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R.J. Schmidt http://kukri.itc.virginia.edu

[This message has been edited by Redbeard (edited 08-31-2000).]
 
Thought I'd jump in on this one. No knife making experience, lots of finance and budget experience. Folks have already mentioned that the cigar guy has the better end of this deal. Not to mention that I didn't see an end to the deal. When are you off the hook? Who owns the equipment if he closes his doors or gets mad. So on and so on. Treat him nice and line him up as one of your dealers. Make totally sure before making him a partner.

Make a business plan (Les Robertson had a good note on this recently in the custom forum), put your goals, sales, costs, expenses, market research (you should know every custom maker in your area and every knife dealer), income needed, time required, time available, equipment needed, equipment really needed, purchase plan, put everything down on paper. Then have some folks go through it and grill you hard. When you're done, you'll have a plan that can give you good odds of success.

Send it to me and I'll look it over as a stranger if you like.

One more thing, I'm impressed that you posted the issue for feedback.

Good luck,

Brad



[This message has been edited by Brad Kenney (edited 08-31-2000).]
 
Hi. It sounds like the guy is just trying to help you. I wouldn't be too paranoid about it. However, if he won't reduce it to writing, don't go into business with him.

A deal could be struck wherein you could allot him 10% of the gross sale price, but only until you amortize (that is: he recoups) his original equipment investment, and ownership of it reverts to you. Anything short of that is not in your interest. Moreover, there are better ways to finance equipment, entitling you to favorable tax treatment for instance, if you are serious about going into business.

If this is the only opportunity for financing you have available to you AND you can get it into writing, it may work for you. Even though I said I wouldn't be paranoid, I, like everyone else so far, would be damned careful too. Also important to note: retailers routinely take 100% (or greater) markups on handmade articles, and it does seem queer that he will settle for 10%.

That's all I have to offer, I guess. You can protect yourself while still doing plenty of business.

[This message has been edited by samwereb (edited 08-31-2000).]
 
Thanks for all the input,I'd like to clarify a few things.First,I've known this gentleman for several years now,he's honest and straight forward.Second,the equipment would be mine to keep,there would be no interest or minimum payments to make.He doesn't need the money.I think he just has a genuine desire to see someone succeed,He's made similar offers to me and others in the past.Third,I would be under NO obligation to make knives solely for him,if I sold a knife outside of his shop it was my idea to give him 10% of that sale toward the equipment,just to pay it off sooner.Last but not least,until all my creditors are paid off(six more years) my credit line is frozen,so any kind of bank loan is out of the
 
Sounds like you will be okay, then. I wouldn't know a good grinding machine if you dropped one on my foot. I'm posting to get this back toward the top of the list where you may get more responses. Good luck. the kid needs a grinding machine. Anybody know what to recommend?
 
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