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    3 Replies Latest reply on Mar 14, 2010 3:30 PM by TheSoloGuide

    Buying out business partner

    princessvail Newbie
      So my partner and I started a baby boutique 9 months ago, an S Corp, I am pretty sure we don't have a buy out agreement, I don't recall that when we formed. This business started as an online business for her and she ran that for a year and a half to 2 years, then we met and we opened a storefront. We are not getting along at all and during our last fight she said she was so miserable she wants to sell her share. I said how much and she was going to get back to me. She thought it over and gave me a number of $300k. Real reasonable right.
      We were open for 6 months last year and profited $11,000 and we are doing sales of about $20k a month. We do not have a loan we used our own money. She is still owed about $11,000. So estimate for this year would be about $25,000 profit and sales of $240,000
      I was thinking of offering her $20,000 cash and thought was reasonable, that pays off her debt and gives her $9,000 to do whatever with. And that frees me from her, which would be heavenly. I understand where she is coming from, this was her company and why would she sell it to me, but as she stated on Sunday she is miserable.
      Anyway obviously her number is waaay out of line and she was just saying it to say something outrageous, but I am guessing this won't be the last time this issue is addressed. What is a good number? What is it based off of?
      Thanks
        • Re: Buying out business partner
          LUCKIEST Guide
          Buying out business partner

          Interesting. Who are you?? Go to Members page and share some info.

          There are accountants and lawyers who specialize in coming up with "good numbers" based on too many factors to go into.

          Good luck
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          • Re: Buying out business partner
            UncleLeon Scout

            Before doing anything, read the origonal agreement between the two of you. If a lawyer created this document for you, he would have included a method of "getting out of bed with each other".

            If there was not lawyer involved, this may be a classic case of "Pay a lawyer a few dollars at the outset, or pay two lawyers lots of dollars later. (I hope not)

            The cold hard facts are this: You have no profit (less than a low-wage job); therefore, there is not real value to the business except for the readily marketible value of assets. Presently, the lease is a liability, not an asset,, because failure of the business will require the lease to be paid off by the owner. (Even though this is a Corp, I'm sure there was a "personal guarantee" required.)

            Your offer is probably (in business terms) reasonable.. If you can't come to terms, let your partner keep the business; walk away, and start another one in the name of your own corp. (You may still be liable for the personal guarantee of thhe original lease). Consult a Lawyer before doing this.
            • Re: Buying out business partner
              Tracker

              Princessvail:

               


              Sorry to hear about your current partner problems.

               


              There are different calculations used for estimating an appropriate sale price for a business, and can vary by industry.

               


              What does the sale price include?

               


              Does it include the business name, storefront and online business?

               

              Does it include all inventory, equipment, fixtures, and furniture in the store?

               

              Does it include a non-compete clause for a defined period of time and region?

               

              How does it handle current liabilities, debts and contracts (with landlord, customers and vendors, if any)?

               


              Is there discretionary income not included in your profit stated in your post? For example, did the business pay for a salary, insurance, personal cell phones, car maintenance, meals, entertainment expenses, etc... for the partners in addition to the $11k profit you mention? If so, then this can be viewed as additional profit for the remaining owner.

               


              Unfortunately, based upon the information that you have in your original post, I don't know that other community members can give you an appropriate number. It may take a lawyer, business broker and / or other professionals to review your books and determine a proper business valuation.

               


              If you decide to settle this on your own with your partner, I highly recommend you include well defined language as to what the sale price includes (i.e. debts, contracts, a non-compete clause if you choose, business name(s), trademarks, web address(es), inventory, furniture, fixtures and equipment list, etc...).

               


              Hope this helps.

               


              Doug Dolan

               

              The Solopreneur's Guide

               

              http://thesologuide.com/