Discussion
A guy I know has a nice little business but it's getting too much for him on his own. He needs to take someone on but doesn't want an employee. So he's offered half the business to me, with a view to my taking it over eventually (he's getting on a bit).
So on the one hand it amounts to buying a half share in the business, but another valid way of looking at it is that I am buying a job, because I would still have to work in it, although something would have to go badly wrong for me to not be quite a bit better off if I take him up on it.
I know his business well and have done bits of work for him from time to time.
Interested to get other people's thoughts on this. My wife isn't keen but it looks like a good opportunity to me.
So on the one hand it amounts to buying a half share in the business, but another valid way of looking at it is that I am buying a job, because I would still have to work in it, although something would have to go badly wrong for me to not be quite a bit better off if I take him up on it.
I know his business well and have done bits of work for him from time to time.
Interested to get other people's thoughts on this. My wife isn't keen but it looks like a good opportunity to me.
It's not just a job, it's buying a stake of a business.
Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
Liszt said:
It's not just a job, it's buying a stake of a business.
Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
This!Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
And are there any claims / liabilities in the pipeline for anything that you don't know about?
Edited by Davel on Tuesday 26th May 14:25
I'll look into it, but I'm pretty sure there aren't any hidden liabilities.
As for what happens when he retires, the current offer is half the business (including a half share in the machinery), and I match the hours he puts in (about 50hrs a week at the moment). When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business). Otherwise he is free to sell his half to someone else.
None of this has been put into a contract yet, as we are still discussing the ins and outs of it all, before approaching a lawyer to sort it out properly.
As for what happens when he retires, the current offer is half the business (including a half share in the machinery), and I match the hours he puts in (about 50hrs a week at the moment). When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business). Otherwise he is free to sell his half to someone else.
None of this has been put into a contract yet, as we are still discussing the ins and outs of it all, before approaching a lawyer to sort it out properly.
Liszt said:
It's not just a job, it's buying a stake of a business.
Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
Agreed. That is a good liszt. Sorry.Do your due dilligence.
What are the accounts like?
Is there a business plan?
How would it work between you and the current owner? How would responsibilities be divided up?
What could go wrong, what are the liabilities?
Could trade fall? How? What are the consequences?
Do your sums, think about all the scenarios and think twice.
Nothing wrong with doing it but go in eyes open.
If the business really is doing well then buying into it and having to work for the business isn't an issue.
RobinOakapple said:
I'll look into it, but I'm pretty sure there aren't any hidden liabilities.
As for what happens when he retires, the current offer is half the business (including a half share in the machinery), and I match the hours he puts in (about 50hrs a week at the moment). When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business). Otherwise he is free to sell his half to someone else.
None of this has been put into a contract yet, as we are still discussing the ins and outs of it all, before approaching a lawyer to sort it out properly.
Something about this doesn't seem fair to me. You add the value but then pay that to him for the other half?As for what happens when he retires, the current offer is half the business (including a half share in the machinery), and I match the hours he puts in (about 50hrs a week at the moment). When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business). Otherwise he is free to sell his half to someone else.
None of this has been put into a contract yet, as we are still discussing the ins and outs of it all, before approaching a lawyer to sort it out properly.
Perhaps I'm looking at it all wrong. I suppose your half will also increase in value too, so swings and roundabouts.
You should see two entities: working in the business, and owning shares of it.
For working, all active shareholders should get a salary. That way, everyone can adjust the amount of work they put in and will be compensated fairly.
For owning shares, you can payout a dividend for each share owned - or invest all or part of the companys earnings into the company. Come time one shareowner wants to sell, you can calculate the companys value/ offer on the market / etc.
If you'd need to invest more than 100k, do not only get a lawyer to help with the contract, but also consultant who can show ways of getting a sustainable model for sharing the company!
For working, all active shareholders should get a salary. That way, everyone can adjust the amount of work they put in and will be compensated fairly.
For owning shares, you can payout a dividend for each share owned - or invest all or part of the companys earnings into the company. Come time one shareowner wants to sell, you can calculate the companys value/ offer on the market / etc.
If you'd need to invest more than 100k, do not only get a lawyer to help with the contract, but also consultant who can show ways of getting a sustainable model for sharing the company!
StuTheGrouch said:
RobinOakapple said:
When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business)[/b]
Something about this doesn't seem fair to me. You add the value but then pay that to him for the other half?With regard to him selling his 50% you need a clause that is referred to as "drag along tag along" ( or something like that) that means you get first option and if you turn it down you can insist the buyer buys your half as well to protect your investment
As said get a lawyer before you do anything.
As said get a lawyer before you do anything.
otherman said:
StuTheGrouch said:
RobinOakapple said:
When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business)[/b]
Something about this doesn't seem fair to me. You add the value but then pay that to him for the other half?He can probably see that and is onto a money winner with the way its set up now.
Du1point8 said:
otherman said:
StuTheGrouch said:
RobinOakapple said:
When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business)[/b]
Something about this doesn't seem fair to me. You add the value but then pay that to him for the other half?He can probably see that and is onto a money winner with the way its set up now.
So he certainly won't accept fixing a price for his (eventual) half now, as unless something goes badly wrong his half (and mine) will be worth more in a few years time.
RobinOakapple said:
Du1point8 said:
otherman said:
StuTheGrouch said:
RobinOakapple said:
When he retires then I buy him out at whatever the business is valued at at the time (which could be quite a bit working on the reasonable assumption that I can pretty much double the current output, and the money I'm putting in will be invested in the business)[/b]
Something about this doesn't seem fair to me. You add the value but then pay that to him for the other half?He can probably see that and is onto a money winner with the way its set up now.
So he certainly won't accept fixing a price for his (eventual) half now, as unless something goes badly wrong his half (and mine) will be worth more in a few years time.
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