Results 1 to 4 of 4

Thread: Partnership question

  1. #1

    Thumbs up Partnership question

    Hi everyone!

    Recently I got to know my mother's friend who owns a family business with her husband. They are a very sweet couple and have ran the Blinds, Curtains and Shutters business for about 15 years. I've shown my interest to partner up with them as I think they have a potential. I ve managed to talk to them through about some of the areas they could expand ( opening offices, showrooms, self manufacturing facility) and their struggles they experiencing now ( mostly IT: database logging, emails , phone calls).I am having troubles deciding on how much capital I would like to contribute and how much of equity I'd like to have as a result of that business. It is very difficult for me to estimate the value/price of the business without any financial data on hand, based on what they said , is that they are making about 500,000 turnover with 40% net profit margin. They are quite old fashioned and have never dealt with partnering up , etc.. I was thinking to offer them my help regarding to IT aspect of the business for about 2-3 month without salary to familiarize myself with their business and then buy in about 20-30% of their business and split profits accordingly. They have told me that they are interested in selling the business as they 'd like to retire soon. But as of now I cannot promise them anything... I'd like to hear your opinions and possible advise in regarding to this partnership. Should I be requesting their financial data to make a better judgment of the net worth of the company and how much should I contribute? I know it's quite a silly question but , I don't want to come across as very straight forward and ill-mannered to them, I'd like to come across the financial aspect as delicately as possible...

    I would appreciate any feedback you can give. Cheers!

  2. #2
    Post Impressionist
    Array
    vangogh's Avatar

    Join Date
    Aug 2008
    Location
    Boulder, Colorado
    Posts
    15,059
    Blog Entries
    1

    Default

    Welcome to the forum Dmitriy. Based on what you've said it sounds like this couple isn't looking for a partner as much as they're looking to sell so I think if you want to become involved in this business you should expect to become the full owner or perhaps partner with some other people. Since it sounds as thought he plan is to sell so they can retire, I'm guessing you won't have to take over the whole business right away, but it's something to consider. If you buy 20% of the business, they might sell the remaining 80% in a few months. So be prepared to take over everything and maybe have something written into any sale agreement giving you first option to purchase the rest of the business.

    I think working in the business for a few months is a good idea. It'll give you a better idea if it's the right business for you and it'll give you some time to learn the business for when you take over. Obviously you have to find out if this couple is open to that, but given the family connection I imagine they will be.

    You will want all their financial data to make your decision about buying into the business. Since this couple is looking ahead to retirement you might talk to them about buying 20-30% in the next few months and over time let them take less of a role in running the business and have a larger percent of the business transfer to you. Maybe you buy an addition 10% each year and when you reach 50% they retire and collect money while you run the business until you buy out the remaining 50%. If you don't think you'll want to buy the rest, think about others who might join you.

    Hope something in there helps. I'm sure others will have more to contribute.
    l Join me as I share my creative process and journey as a writer | StevenBradley.me
    l Design, Development, Marketing, and SEO Tutorials | Steven Bradley's Notebook
    l Get my book about Design Fundamentals

  3. #3
    Web Consultant
    Array
    Join Date
    Aug 2008
    Location
    Las Vegas
    Posts
    9,842
    Blog Entries
    1

    Default

    From what I've learned here on the forum, it's not solely your call how much investment gives you how much equity. It's usually the seller who puts a value on the business and how much they're willing to sell of it, and then of course you would look at those numbers...maybe with your own accountant...and agree, disagree or negotiate from there.

    They need to establish the value and what they're looking for before you can have anything to go on.

    I supposed you could do an assessment yourself and make an offer based on that, but I would expect them to get their own numbers independent of yours to see if it's the right deal for them.

  4. #4

    Default

    I agree with both Vangogh and Harold. And would like to offer another point of view. I don't know what's your financial situation and if you will be able to buy the entirety of the business. Keep in mind that whoever will buy the rest of the business (something that sounds like it would happen relatively soon), might not be a good partner. Yes there are laws and contracts to protect you. Bottom line, when you get to court all the matters is who has deeper pockets. I would advice you to do the math and decide before investing if you are willing to be the sole owner of the business. Vangogh's plan to buy it gradually is a very good idea (in my opinion).

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •