Musings on selling or buying out partners

[BillR]

I have been heavily considering the idea of buying out my partners or asking them to buy me out. I know the price would be high - in the $500,000 to $750,000 range per partner.

Out of the blue another company inquired about buying us. If they did we could reasonably expect a higher price than the above - probably right around the $1,000,000 mark each. As part of this deal I'd be required to stay on as an employee for a while - probably at least a year. We have done our initial talks and I expect to hear more soon.

I should be happy about that....but I have surprised myself and I am not. I actually find the idea of going into debt and being sole owner or going off and starting my own company after being bought out MUCH more appealing. Getting the big check is the least appealing one of these options for me.

Life is so weird

What would YOU think under these circumstances? On the one hand I'd have a heck of a nest egg and a job. On the other I'd have a bunch of debt and a total freedom to do what I wanted - as well as the responsibility that goes with that.

[KristineS]

Ultimately, only you can make that decision.

That said, I'll still throw in my two cents anyway. :-)

If it were me, I'd go for the buyout, work the year, and know that at the end of that year, I'd could do what I wanted, and I'd have the money to do it. A year isn't really that long, and you'd be in a much better position to do whatever you wanted to do next.

For what it's worth, that's what I'd do. I do, however, understand the attraction of buying everyone out and being sole owner. If you've put a lot of time and energy into the business it may be hard to let it go.

[Dan Furman]

Originally Posted by KristineS

Ultimately, only you can make that decision.

That said, I'll still throw in my two cents anyway. :-)

If it were me, I'd go for the buyout, work the year, and know that at the end of that year, I'd could do what I wanted, and I'd have the money to do it.

That's exactly what I would do.

Plus, a year off from being the boss will probably be rather pleasant.

[Business Attorney]

I'm with Kristine and Dan. A year goes by incredibly fast. Besides, you could use the year to fully develop your business plan and hit the ground running. Unless there is some specific window of opportunity that is likely to be lost, I'd take the money.

[LJLynch]

I agree with the others as well. But that is assuming that you can be an employee with the new ownership - can you give up control and just do what someone else wants you to do? Of course, a lot of that depends on what role they want you to play during the year. I would have a lot of trouble letting someone else call the shots in what I would probably still consider to be my company!

[orion_joel]

Bill, if it does come to an external purchase and you get that big payout. Just be careful of the terms. I used to work for a guy who did sell to a much larger company only (and i am sure he was happy with the terms) to get a small price up front with a massive bonus if they met targets in the first year. While he met the target and could have stayed on with the company, he left after 13 months, with bonus in hand.

The actual bonus that was worked out, would have been about equivalent to the profit of the business for the year, however the target was about two and a half times the turnover before the new company took over. The only difference was if they had not taken over the potential to expand the business that much would not have been there, due to limited financing.

[BillR]

Originally Posted by orion_joel

Bill, if it does come to an external purchase and you get that big payout. Just be careful of the terms.

Thanks all for the comments.

Specifically though in relation to the comment above - I couldn't agree more. My selling price increase about 50% if this deal is paid out over time. There's simply too much risk. I'd prefer the cash up front UNLESS there is some accounting advantage to taking it over time.

Since we are talking about a large amount of money here - and since I think it is likely we are getting Obama as President - I suspect it will be taxed higher if I wait to get the money.

I'm not knocking Obama of course - I'll probably vote for him. However, it's pretty certain he will raise taxes a bit on the upper income brackets. I do REALLY like his energy policy and I'm interested in possibly starting an energy company next. Since I know VERY little about that area I need time to educate myself.