looking at buying Dads co.

[soccer coach]

I'm thinking of buying Dad out. Some of the things that are coming up I'm sure can be done without much problem but could use some help. One of the big ones is the phone number. He has a sep. land line into his home. How could I get this number to my location? He will be staying on for 10 yrs. What makes the best tax sense? Paying him all in wage or paying him in a form of payment for the company? He wants to sell out while he is in good health and the co. is doing well but wants to remain on at a wage that is equal to what he was paying himself when he owned it. Alot of little things seem to be making things harder than what they should be.

[jamesday]

Sounds like dad wants to have the cake and eat it too. i've been in business for myself for 7 years. i started when i got out of highschool...i'm 26. my firm is rather successful to be honest, but not because it was easy. i wen through a bloody hostile takeover of my best friend 2 years ago...he was majority share holder of the current company because 3.5 years ago we merged together.

that was a brief summary of me...now to your problem. first things first. HIRE A CPA OF YOUR OWN. Don't trust dads...that's a conflict of interest. You go find a good one that you like and tell him or her to help you out. I spent 4K on mine and I love her. If I would have had her in the beginning when I was in your stage of taking the company...it would have saved me 100,000K. Trust me. A good CPA will also be able to help you with the tax questions and plan out your companies future. Also, hire a good attorney...you'll need one for the rest of your life. Don't hire a buddy, or a relative for any of the above jobs either. You find a professional that you have no ties to. That way when he or she screws up, you can sue the (*$% out of them. That's called liability. Owe, and don't use a client. You can ask a client for an opinion...but don't mix business with business.

Good Luck...

[Evan528]

Why would you continue to pay your dad a owners salary if you own the business?:confused:

[jamesday]

I was thinking that myself. I might could understand a royalty check for a certain time span...but please. I might could also see him keeping maybe 10% of the stock and getting a check at the end of each year based on the companies gross profit...but that's about it

[Bob Minney]

Sounds like trouble starting to me.
Somebody has to be boss, is it going to be you?

If you dont get along well now, bad idea.
If you do get along, that could change easily.

Friends, family and business are not a good mix IMHO

[65hoss]

Good luck, your really going to need it. This is going to be real sticky. I think I'll keep the rest of my thoughts to myself on this one.

[paul]

First I take it that you don't have the money to outright buy him out. Are you part of the business now? If you are is your salary comparable to his? Lastly what is the business worth?

[soccer coach]

I should maybe give some more info. His co has brought in abit over 100,000.00 for the last several years. I would be walking in and taking over and paying nothing for it. I don't work for him as I have been off due to a shoulder injury that will be fixed soon. He doesn't want anymore than he could make at a good job. He is putting this much money in his pocket now but just wants to sell when he can get good money for it. Most of the co. we've seen sell out have waited until they have very little to sell as when they get older they work less and make less. He has a good set up and is always turning down work as he is full. His co. is ready to move to the next level if I do this deal. I know his pay will be alot but what would most of you that have a co. that brings an easy 100,000.00 sell the whole deal for today. I also don't have to worry about my help going down the road to be my competition. I have run my own deal before my injury, can you say get some insurance!!! I will start it again if we don't work something out.

[KenH]

Just make sure you have all your numbers straight. Is that 100,000 gross or net??? If it is gross, you are not really talking about alot of money for 2 people. Just be careful.

[Lanelle]

A solo-operator can gross more than $100,000.00 per year. After paying expenses there isn't enough $$ left for two guys to each have 'good pay'.

[soccer coach]

100,000.00 gross. He works 8 months per year for this. I will be getting more accounts as well as the ones he has. Like I said he turns away work all the time. I am trying to look at the whole picture but sometimes I think my own deal would bring me more money than Dads deal for the first few years.

[bruces]

Good advice about getting your own accountant and attorney. The one's your dad uses can not look out for both your and his interests. After the deal is done, you could still use his current people if you like them.

How I would approach this is as follows:

1. Determine a price for the business.

2. Determine how you are going to pay for it and over what term.

3. Determine a compensation arrangement for your dad.

4. Set clear parameters for the takeover. Who is in chage, job descriptions, how much he is going to work, etc.

5. Get everything in writing. You wouldn't want business to ruin a good family relationship.

Hopefully you can reach an arrangement you can both live with.

Good luck!

[jamesday]

Buying a company is extremely tricky. After you do it...you will sit around and think about all the things you would have done differently...and all those things will cost you around 5-10 grand apiece!!!!

This is the most important point I think:

There is no reason why Dad should continue to get a "salary" after he "sells" the business. If that is the case, he hasn't "sold" you anything...he's pimping you out (for lack of better terms).

His "salary" and final payment will be the check you give him for the entire business. The price of which should be determined by the CPA and Attorney. If Dad doesn't agree to this, start your own company and take his clients. After that tell him, like I was told once, it's "nothing personal, just business"!!!

If you agree to pay him anything for any duration of time it will not only hurt your relationship, but breed resentment and anger. Trust me...

Think about it...you're busting your tail and he gets a check. I know it's your dad, that's why this is hard...but again, it's business...nothing personal

[The Lawn Choupique]

Originally posted by jamesday


There is no reason why Dad should continue to get a "salary" after he "sells" the business. If that is the case, he hasn't "sold" you anything...he's pimping you out (for lack of better terms).


Think about it...you're busting your tail and he gets a check. I know it's your dad, that's why this is hard...but again, it's business...nothing personal [/B]

Thank God for ungratefull children. I am just gratefull that I am not a "consultant". I bet that there is a lot of posters on this site that would give anything to just have there Dad's still alive. And would not think that their Dad's were "pimping them out". Nothing personal you understand.

[soccer coach]

He would be getting paid for work he will be doing. Without talking exact numbers he wants x amount of money to start with a 5 % increase each year for 10 yrs. He will be working for me during this time to earn this wage. Now to get to paying him. On the 11th year he wants what he is making now as a flat pay for 13 yrs. I won't be paying him anything for his co. until the 11th year of this deal and at that point he will have helped build it to a much bigger operation and will be getting what he started at without any cost of living increase. It is hard to make up my mind as just walking into this deal with all the equipment, trucks,and staff is tempting. It might be a mistake but if we can't get together without a bunch of lawyers then i will pass. THe thought of having to have a lawyer help iwht a deal with your Dad is sick. It seems he is taking most of the risk as if the co doesn't continue to grow and can't make it because of giving him too good of a deal he will suffer as well,if the co goes under so does his retirement. What do you guys pay a key employee that will never leave you and has 15 yrs exp. as a owner?

[bruces]

Originally posted by soccer coach
He would be getting paid for work he will be doing. Without talking exact numbers he wants x amount of money to start with a 5 % increase each year for 10 yrs. He will be working for me during this time to earn this wage. Now to get to paying him. On the 11th year he wants what he is making now as a flat pay for 13 yrs. I won't be paying him anything for his co. until the 11th year of this deal and at that point he will have helped build it to a much bigger operation and will be getting what he started at without any cost of living increase. It is hard to make up my mind as just walking into this deal with all the equipment, trucks,and staff is tempting. It might be a mistake but if we can't get together without a bunch of lawyers then i will pass. THe thought of having to have a lawyer help iwht a deal with your Dad is sick. It seems he is taking most of the risk as if the co doesn't continue to grow and can't make it because of giving him too good of a deal he will suffer as well,if the co goes under so does his retirement. What do you guys pay a key employee that will never leave you and has 15 yrs exp. as a owner?

Good points, but again, you need to get your agreement set up front and in legal contracts. The thing this will do is force both of you to think things out more, explore all the angles, etc., that the good old informal family deal might leave out.

This process could bring out issues that neither of you have thought about, and force you to settle them up front, instead of them presenting a problem several years down the road.

What if you work for a few years and he changes his mind, doesn't want to sell?

Where would that leave you?

Also, you need to look at things and make sure that there is enough net left to pay him and provide enough income for you to keep you both motivated to grow the business.

[jamesday]

Bruce has some very good points. And please...don't get me wrong if it wasn't for my father I would not be where I am today...I owe him everything and am very grateful.

However, over the past several years I've gotten a hard taste of reality and how the world can sometimes be. Considering I do not know any of you personally I have to assume the worst.

Like Bruce said, what if he doesn't want to sell in 5 years? The two of you are making extremely long-term plans and that can sometimes be impossible or at least extremely difficult to live up to.

How about another thought...what if dad in say 2 years thinks the company should begin offering a service you're not interested in...or you feel will bring the company down? How do you settle this problem? Or how about this...what if the two of you build this great company and it gets large and a competitor offers your dad a huge sum of money to buy him out? Who has the control to say yes or no to the deal? Does he have to inform you about it during the negotiations? What are you going to get out of it? What percentage do you own?

Like a great friend of mine (and my lawyer) once said, "what's not written doesn't exist". And that can be the hardest lesson ever learned.

Again, maybe I'm assuming the worst but I've been there done that!

[soccer coach]

From day one I will own all the stock and have complete control with him being a regular employee. I understand your conserns and I thank you for them. It is a long time to see down the road and alot can happen. Part fo me doesn't want to do it for fear of family problems but with my arm being injured the way it is I'm not sure I could do it again myself. I know this is why he wants to do this deal now. My bit of devine wisdom is if your a one man show get yourself enough disability insurance for the accident your never have. It has cost my family everything. I haven't heard what an employee would be paid that will never jump ship and that had the yrs in the field. I would like to know. Thanks.

[Got Grass?]

First and most important thing is your relationship with your Father. He is your father! I'm sure he has & is still willing to forgive you for your mistakes I'm sure if you take over he wont like some of your decisions, just dont make it something you will argue about at the thanksgiving dinner table... Heck your his son. He odviously has managed to start & become a sucesfull business owner, so he must be doing something right. Remember that!

A company I worked for did this.
Father owned the co. gradually shifted ownership ("stock") over to his son. Over the cource of many years. His son was on a hourly pay. Switched that to 5% profit the first year & ever year uped it 5-10% of the pofits. After 50% the son owned the co. & switched all the "legal" stuff to the son. After many years the son owned the entire co. & put his father on a salary somewhat based on profits. He works the phones & does basic office work as now he's older & can't do as much running arround. Also this gave them the right to say the business has been arround for 75+ or whatever years. Owners, Fathers, Father dided & left it to him.

Decision making was the hardest part. Let your father decide on additional services to offer, or major equipment purchaces untill you take over. Your job would be to, buy parts, advertising, run the crews, price out & deciding to take the little jobs. Bigger jobs you would both decide on, as your father has the "experience".
More like a "head" manager position untill you take over & your father will then be an "advisor" & "employee" to your company.

I have no clue as to your current relationship with your father, hopefully it is a good one & something like this would be possible as it's a smooth transition & less likely to cause arguements & flying food at the thanksgiving dinner table... Momma wouldnt be to happy with that. And everyone know's if momma aint happy NO ONE's happy.

[bruces]

Originally posted by soccer coach
From day one I will own all the stock and have complete control with him being a regular employee. I understand your conserns and I thank you for them. It is a long time to see down the road and alot can happen. Part fo me doesn't want to do it for fear of family problems but with my arm being injured the way it is I'm not sure I could do it again myself. I know this is why he wants to do this deal now. My bit of devine wisdom is if your a one man show get yourself enough disability insurance for the accident your never have. It has cost my family everything. I haven't heard what an employee would be paid that will never jump ship and that had the yrs in the field. I would like to know. Thanks.

The fact that you will own 100% and have complete control clarifies things. I would still recommend strong written agreements as to compensation arrangements, puchase price of business, how it is to be paid, and job responsibilities.

I know its your dad, but putting it in writing will force you both to think about some things and get your views out in the open up front and maybe prevent some possibility of future conflicts.

As far as what a loyal, experienced employee like your father is worth, like the Mastercard commercial "priceless". What you can afford to pay him and make a living for yourself, you two will have to work out between yourselves.

Again, good luck!

[kris]

Allot of good advise here .... except the one that said start on you own and take your Dad's clients.
Sounds to me like you have nothing ... your injured and your Dad is trying to help you out.
Work out the best deal you can for both of you and have a lawyer look it over and finalize the deal.

[soccer coach]

Kris, That is the way we, wife and I, are looking at it. I'm going to have shoulder reconstruction surgery done to make my shoulder have less pain and some more use but still will be limited. We have agreed that it will be looked over by his guy and one of mine before we shake. Thanks for all the help.

[scott's turf]

Are there any employees? You said that your dad wants what he used to get which I assume is everything after the expenses are done with which would leave you with nothing. You are in a unique situation but like others have said $100,000 gross is not that much at all. Net is all that matters. I would be surprised if he netted $65k. This type of business is hard to run with two cheifs. Not enough money to go around

[Mack]

I just have one thing to say.. Dad won t be here for every. and I think you need to enjoy the time with him.. I just got a call that my mom has bone cancer. I live in ohio and she lives in michigan. So all i can say is enjoy the time with them because you don t know what will happen and does it really matter. Sorry just that it hits hard after. Thanks

[Mack]

I think you should sit back and enjoy the time with your dad and not worry about what to pay him. I just got a call that my mom has bone cancer (which has no cure) and gave her 3 years. I live in ohio and she is in michigan and with the mowing season I will have to make a big effort to see her. Sorry If i sound rough but enjoy the time you have with family, it goes fast. Thanks for letting me get this out.

[strickdad]

my question is , if the company for some reason begins to lose money do you still have to pay? or can you do as any of the rest of us and lay employees off? the way it is now he can only take a owners draw, in other words if the co. begins to lose money he does too. but if he becomes a "contract" employee, then if the co. loses he want , but you will...

[soccer coach]

If the co runs into bad times he would as well. It looks like the deal might not happen as his wife is having some second thoughts. Only time will tell. His co is running on a 60-65% profit and has for years. He mainly does maint. of existing landscape. Almost no mowing so he has very little equipment. I don't understand how the mow only guys make any money. It seems the bigger"expensive" equipment they have the cheaper they will work for. Something is wrong with that picture. Yard A is a 50.00 yard no matter what' using a 21" mower or a 60" you still did the same lawn.