Attempting to buy business you work for

Discussion in 'Growing and Managing a Business' started by scottboarder, Jan 12, 2011.

  1. scottboarder

    scottboarder
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    Hi,
    I work for a business as a consultant, the business is a sole-propriatorship owned by one person and I am the only other employee and I work FT. The owner works PT but has very little input to the income.
    The business does not make much in sales, but takes a good income from service and consulting. I take 60% of that income already and the business owner takes 40%. I would like to take ownership of the business but would like some advice on how to approach the owner.
    The owner does not have any competition in the area, no other interests from potential buyers, and may not be financially motivated to sell.
    I have access to company books and can see P&L, expenses etc... but have no idea how to value the business as according the books the business is breaking even, it also has debts but im not sure if they are personal or business debts.
    I would also like advise on how to approach the business owner to make an offer without putting my cards on the table with any monetary offer.

    Does anyone have any advice on where I start?
     
  2. Fergal

    Fergal
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    Welcome to our business forum scottboarder, what country is the business based in?

    Maybe you could consider setting up a business on your own, i.e. without buying the existing business. If you know the business well, have already been delivering the relevant consultancy service and have contacts with the existing clients - perhaps you can avoid the cost of purchasing the business and use the money saved to invest in your own business and set yourself up.

    Setting up on your own would have the additional advantage of not incurring any debts or other liabilities from the existing business. This is something you need to be very conscious of when buying a business, because once you purchase a business you take on all of it's debts and liabilities (that's the law in Ireland perhaps it's different where you are located). You need to do a careful analysis of the business (due diligence) to see what liabilities it may have. It's even possible that after you purchase the business, someone could decide to sue it for something that happened before you were the owner and the liability would still be your responsibility.

    What are the advantages of buying the existing business over and above setting up on your own - perhaps they are related to the good name and reputation of the existing business or access to certain technology or know how?

    Why do you want to buy the business? If I understand it correctly, you say that the existing owner works in the business part time and brings in a proportion of the income. Is it possible that the business works better with the two of you in it, than if you owned it on your own? Perhaps becoming a partner would be a better option.

    Please post back with your thoughts and a little more info.
     

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