I am an electrician for a smaller but very competitive and profitable electrical contractor. The owner is tired of the responsibilities of being an owner, wants to spend more time with his children as they grow up, and wants to turn over the company to me, and then become just an employee that works 40 or less hours a week for the company, while I assume ownership. What kinds of things should I expect as part of this kind of deal. We haven't talked about this thoroughly yet, but we have talked about it being a very real thing in the next year. I presume he will want to maintain stake in the business for at least a few years. I just want to make sure we both get a fair deal and that neither of us gets too much or too little from the change over.
You should sit with him and your CFO to build a realistic 5 year projection based on the previous 3 years of historical performance. You would then look for other market comps to determine a multiple (either of revenue, EBITDA, or Net Income) to determine a fair valuation. You would then have to find an outside investor or bank to essentially LBO the company or acquire a stake in the business. As part of that agreement, you would create an employment agreement and an earn out schedule based on the company performance going forward. Whatever you do, make sure you acquire a majority of the business and establish voting control. Outline explicit responsibilities of both parties so that there are no confusions regarding roles and expectations. Make sure to get a very good lawyer.
You have to prepare a full business plan for yourself. There is no way to know if this is going to be a fair deal. The economy could tank one day after you take over... or it could take off. And what about "maintaining a stake for a few years" what does that mean? Let him own and trade his stock as he feels fit. That's not up to you. When you take over you have to take charge. It's a very hard thing in some cases to go from an employee to an owner. Make a full business plan. Where are you going. Who are your future clients. What strategic plans are you thinking about. Don't think you will just step in and things will just roll along as they were. This is a very big deal and it needs to be well thought out.
first over all ownership is fucking interesting.
you have to expect more like programming, execute,manage,control and many other.
but the best advice i can give you.. assume things have done with in time make program on your mind and fraction it through the process and put minimum goal for each fraction and test your self repeat this process until you feel your are connected..
my second advice is not over sell your self !!
Its perfectly fine to work in someone else's company as an employee and still manage it as the face, like a CEO.
For example: Take Sundar Pichai. CEO of Google, he was not a founding member but he became CEO and has a decent amount of shares in the company.
What you get in return working for the company is the stocks of that company. It may not be a corporate style company so you may have to deal with 'stocks' in a different way but that's the way how it is done.
I would suggest first sit with him ,anand have a good discussion with him. Then later you can really know how better to take it over, with a better deal.
1. Need to seat down with the owner and talk over the terms of sales e.g -Have a business valuation performed to determine how much the business is worth, and consider how the current owner’s connections and expertise may affect that value.
2. You will need to speak about the price of the business and repayment plans. Are you working toward buying it ?
3.Have a professional accountant evaluate the business’s written financials very carefully to make sure everything is on the up and up, and question anything that may be unclear. When you buy a business, you take on a tremendous amount of liability for things that may have happened before you were involved, so don’t leave anything up to chance.
4. A fair deal to both is a deal that is clear and open so question everything and be open with current owner
You have to first deliver to those customers, so that you can build trust in them.The reason is the day when you will start your business then it will become very easy for you to bring them on board.Do not always look up for success because it is very short,focus on mistakes
the ony time i believe you think about that is if the business is not doing well
and you feel you can do better in bringing it up by taking up ownership and be in a better position to advice and make decision on what to do then you can learn about how to bring up a court case against your company that you believe if won will give you ownership right. but i dont think that will be possible.
better still start up your own business