Buying into a small business?

Is one of your family members offering you an equity stake? How much? What size and type of business?

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Is one of your family members offering you an equity stake? How much?

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Yes, we haven't sat down yet to talk numbers. We talked about me buying in to the company the other day as the owner is older and ready to start getting out. So right now I don't know how much equity he is interested in giving me at the moment.

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What size and type of business?

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Without revealing too much I'll say it's a local small manufacturing business that has an annual revenue of about 500K.

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You are talking the business's gross revenue is $500k or net revenue?

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Gross. That's the only information regarding the books that I have at the moment. We have a meeting next week to talk numbers. I'm just wanting to have a game plan before we go sit down on an idea of the best route to do this right.

The end game is me owning this business 100% when it's all said and done. There are no other interested parties that would want it so that's not an issue. The owner and I have talked for years about me taking the business over one day so this is something that was always planned. I just don't know how much I could afford to buy in at the moment.

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First off you need to get it valued

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I'm curious to know the process of having this done.

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Without revealing too much I'll say it's a local small manufacturing business that has an annual revenue of about 500K.

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If it's only a half-million a year business, why not just take your money and start your own business and own it outright, and compete against him? If that's not an option, if he has any family he plans to leave his share to, you would not want to be in the position of being a minority owner in a small business like that. You could be booted, with no income from the business, and profits could be hidden through many ways. You could really be shafted here in the long run.

ETA - *Didn't mean to be so negative, but you also have to consider the following. If you know this business so well that you would consider buying it, he also knows that you know the business well enough to consider buying it too, (as you've discussed) and he may try to leverage that to get a higher value than it's worth. You have leverage as well. If nobody in his family is interested in the business, he may end up in the position of having to shutter the business if there is no buyer, so he has incentive to sell the business to YOU because, really, who else would walk in to that business that knows it well enough to fend off you as a competitor? Probably nobody. See my point?

Don't overpay here. You need to know from a legit business assessor what it's value is worth, and what kind of income you can derive that (A) pays you at least what you're making now, and (B) enough more to pay for your monetary costs over a reasonable period of time, and finally, (C) what the growth projections and risks are for the business once the original owner departs.

Buy 100% of the business for zero dollars, let him retain intellectual property of the brand and pay him an exclusive licensing fee of 5% net profits until he dies or reaches a final payout equal to $200,000, or the business is dissolved, whichever comes first, at which point you take possession of the intellectual property.

After he signs the deal, shut the place down and liquidate all assets keeping 100% of the proceeds as the sole owner.

Then use those proceeds to open up a new shop in the same building doing the same thing with a different name.

And try not to get murdered.


You should watch more Shark Tank and American Greed before you move any further in this venture.

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deeprig9

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Buy 100% of the business for zero dollars, let him retain intellectual property of the brand and pay him an exclusive licensing fee of 5% net profits until he dies or reaches a final payout equal to $200,000, or the business is dissolved, whichever comes first, at which point you take possession of the intellectual property.

After he signs the deal, shut the place down and liquidate all assets keeping 100% of the proceeds as the sole owner.

Then use those proceeds to open up a new shop in the same building doing the same thing with a different name.

And try not to get murdered.


You should watch more Shark Tank and American Greed before you move any further in this venture.

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LOL...The first thing that came to my mind when I read this part...

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pay him an exclusive licensing fee of 5%

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was, "that's some Mr. Wonderful-type sh!t there..."

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First off you need to get it valued

I'm curious to know the process of having this done.

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I'm finishing up the process. Hired an outside firm from a list of recommendations my attorney provided. All quotes ranged from $12K-16K. I hired the healthcare specific financial firm, who had a cheaper quote of $8K, but I'm already $13K into it at this point b/c the comp plan had to be redesigned, and they are all paid hourly.