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Greg_M
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I can really only comment from the perspective of the industry I’ve worked in for a long time (construction).

I think the idea has some merit but would be very difficult to implement successfully.

In construction there is very little ‘direct’ employment, tradesmen usually finish up in some kind of ‘contractor’ situation – either pyramid subcontractors for a larger business or building up their own business from scratch.

So your idea could potentially give a newbie a bit of a head start on a common option.

Also as someone who has exited from contracting it has some appeal as a way to exit gracefully and perhaps even get a return on assets.

BUT … here’s what I see as the downside.

– Newly minted tradesmen rarely have what it takes to survive and make a profit in a very competitive industry.

– There is no “goodwill” in building businesses unless they’re very large, the business is normally based on the ability and personality of the person driving it. It would be virtually impossible to guarantee a “client list” or work on hand. The only exception to this would be maintenance type businesses, e.g. in plumbing and electrical where a licence is required to operate and repeat business is common and has been marketed well by the business owner.

-The fixed assets usually don’t have a great $ value to the purchaser unless the business has major specialised plant and equipment specific to the trade i.e. it’s not hard to buy a van or ute, go to Bunnings and buy the basics (many apprentices will have acquired a substantial set of gear while serving their time anyway).

– How would an apprentice/new tradesman finance the deal anyway? Most 20 somethings fresh out of their ‘time’ won’t have a cracker to spend on anything but the next night out.

How I exited active contracting I think is typical of how it usually is done.

I had a ‘senior’ tradesman and long term employee who was already known and trusted by regular clients and was interested in continuing the work … a side deal was done (pretty much at cost) on the serious items of plant (read expensive to replace new), a lot of peripheral gear was just thrown in ( I no longer wanted a yard full of crap). There was no goodwill and no formal sale of the business, we just swapped chairs.

He managed to retain 90% of the regular clients (still does 8 years on) and I continued to work for him on an ad hoc basis that suited me (still do occasionally).

I know a lot of players with 20 plus years in building that would sell up at cost in 30 seconds if they could, I think your real challenge will be to find buyers that are interested.

Maybe other trade sectors are different and your model would work well, good luck with it.

Cheers Greg