What would you do in my boat?

[adoely]

Need some advice on a business dealing

I spoke to a silent partner of a company im an employee of that is worth around 10m and will do 3m in profit this year.

I bring in around 40% of the gross revenue. The main owner wants to sell me at a 10m evaluation. But I spoke to one of the silent partners that owned around 27% and he has agreed to sell me around 10% at a 7m valuation and is willing to “finance” it to me at a 8% apr.

Now the thing is I only have around $25k currently that I can invest.

My current salary is $80k plus 3.5% commission of gross sales which will be around $130-50 this year. So every quarter I can pay for the equity.

The only caveat is that the main owner has to agree to this.

What do y’all advice that I do?

How can I go about drafting a legal document for something like this? How would this work?

 

[camaroman58]

@adoely If you bring in that much business. bring them a plan where you pay it off monthly. Then get a loan. Then, sell like you've never sold before.

 

[khaellis]

@camaroman58 But be ready to walk if you don't get a favorable deal... its the only leverage you have... and never buy less than 51 percent or you really have no say or control.

Find a business broker or attorney to help.

 

[bornagainsteve1]

@khaellis It’s not realistic for everyone to always have more than 50% equity of a business. Today they have 0%. Additionally they could negotiate some changes to the shareholders agreement to make sure key decisions are unanimous.

 

[adoely]

@camaroman58 Yes that’s what I want to do. But how would I structure a deal like that?

 

[adoely]

Where I come out on top?

 

[bornagainsteve1]

@adoely It may not be possible or at least affordable. Instead you could focus on making sure the shareholders agreement gives you protections even as a minority shareholder (e.g key decisions, first refusal on other shares, dilution protection etc).

 

[adoely]

@camaroman58 A deal where I have a time period to buy it makes sense to me

 

[bornagainsteve1]

@camaroman58 Seller finance is a loan

 

[philshackleford]

@adoely You need a lawyer.

Not only to write the purchase sale agreement, but an attorney will make sure all the existing company operating agreements are amended and you don’t get screwed (unintentionally or otherwise).

What percentage of the company are they selling you?? How much is it going to cost you?

 

[adoely]

@philshackleford 10% at 7M

 

[philshackleford]

@adoely My bad. I misread that in your initial post…..
Seller financing is common. 8% isn’t bad. If you want to avoid interest, maybe write in your agreement the option for quarterly principal curtailments so you can repay quicker.

If you already bring in 40% of sales, it’s clear why they want you to be an owner, honestly, I think you have way more power to negotiate.

Unless the one of the owners is planning on walking away, they shouldn’t have an issue with you paying over a longer period If you want to lower the payment. I’ve seen seller carry back loans from 3 years to 10.

 

[adoely]

@philshackleford I think I would shoot for 10 years

 

[adoely]

He would still maintain around 18% ownership

 

[blessyourheart]

@adoely did you grow the business 40%, or you help facilitate 40% of the business that comes in? You also need to crack their books open. You are probably going to have to get uncomfortable to see what valuation deal they think you are worth keeping

 

[adoely]

@blessyourheart I bring around 40% of the revenue