Buying a job?

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RobinOakapple

Original Poster:

2,802 posts

112 months

Tuesday 26th May 2015
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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.

RobinOakapple

Original Poster:

2,802 posts

112 months

Tuesday 26th May 2015
quotequote all
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.

RobinOakapple

Original Poster:

2,802 posts

112 months

Wednesday 27th May 2015
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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?
I agree. You seem to be buying it twice. Would you be better buying it outright now, agreeing to keep him on as an employee?
This because at the moment, if your share is say £150k to buy 50% of the business (worth £300k) and you double it up to £600k, then you now need to find another £300k to buy him out due to your hard work.

He can probably see that and is onto a money winner with the way its set up now.
I believe I see what is being got at here, but I can't see what other system I could suggest that would be fair to both parties. Firstly, it will be his hard work too, and it's one of those businesses where there is always the opportunity to re-invest some of the profits in more and faster equipment and in developing better sales systems. And we already have plans for what some of those investments could be.

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

Original Poster:

2,802 posts

112 months

Saturday 30th May 2015
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DUMBO100 said:
Buy in at the current value and then double the turnover when he retires
Double the turnover?

I don't think so.

Too easy to manipulate- lower prices = higher turnover but lower profit.