I am the son of a man trying to sell his Family business (Health Insurance, Employee Benefits Brokerage).
Firm offer of $2.5M from the corporate world, on the table.
Firm offers from both me and my brother, substantially less than $2.5M. Offers that he would prefer to take, rather than sell out to a corporation.
My offer and my brother's offer are along the lines of $300k in payout (of company revenue) every year for 5-7 years.
What I need, or what I think I need, to seal the deal is something like $100k up front, maybe another $100k in year 2.
With a corporate entity on record with a 2.5x ARR evaluation, and a father who's willing to sell to one of his sons for much lower than that, I consider this a sure thing for any investor -- but I don't know any investors.
There is no such thing as a sure thing business. A new owner can easily and quickly run a profitable business right into the ground from lack of skills, knowledge, understanding, or trust of customers. Investors prefer much higher multiples on their money. The majority are not in it for the long haul with steady income. If it's such a sure thing, approach traditional lenders like a bank, show them the financials, and if they're credible, you should have a relatively easy time getting funds based on patterns and future orders in the pipeline. Then you won't be beholden to any whims or unreasonable investor terms.
just take over the business with no money upfront and direct your dad a salary of $250k for seven years....he's your dad; why would you need to come up with the money and have to deal with some outside party?
ON second thought; $2.5 is a pretty good deal; depending on the margins of the business. How much would you be left with after paying the $250k a year?
Another offer could be a partial buyout of $200k for five year; with the rest as a minority stake with dividends.
Call me at 617-586-8565, if you want...would be glad to advise.
Even if you do know investors, the right thing to do is for your father to sell for $2.5M to the corporation, and then have the corporation hire you as an executive.
Just talk to your accountant/advisor, inter-generation transfer of business is pretty common and there are well-established techniques to facilitate the transfer. If the business is really worth as much as you say and your dad needs some cash upfront, just have the company take a loan and distribute the proceeds to your dad. Don't think an investor would be interested in an illiquid, minority stake in a business.