How much do I pay partner for buyout?

Discussion in 'Business Operations' started by wrestlingcoach, May 26, 2005.

  1. wrestlingcoach

    wrestlingcoach LawnSite Senior Member
    Posts: 251

    My partner is possibly changing careers from a teacher to a whole lot more money, sales.
    If he gets the new job, I want to buy him out. The date if it happens will be June 30th.

    Our Liabilities
    Truck loan $5000
    Prepaid acct $500

    Assets
    Equipment worth $ 30,000
    Prepaid insurance about $ 1750
    Account Receivable about $4000 when this occurs

    Have as of today 38 accounts
    Projected Gross for the whole season $ 54-60,000 grossed already $18,000
    Only one with a contract worth about $25,000 per year
    The rest could quit us anytime odds are they will not.

    Here’s our equipment
    item Paid for bought Worth Today 5/2005
    1 8' utility trailer given used $300.00
    2 12' utility trailer $750.00 used $600.00
    3 16' landscape trailer $600.00 used $900.00
    4 16' utility trailer w/ cage $400.00 used $750.00
    5 Gravely 50" walkbehind $2,800.00 new $1,000.00
    6 John Deere 36" walkbehind $1,300.00 used $1,200.00
    7 Scag 61" turf tiger 27hp $6,000.00used $5,000.00
    8 Scag 61" turf tiger 27hp $9,703.00new $8,000.00
    9 Shindawa T230 trimmer $300.00 new $100.00
    10 Shindawa T230 trimmer $300.00 new $100.00
    11 Shindawa T231 trimmer $282.13 new $175.00
    12 Shindawa T231 trimmer $282.13 new $175.00
    13 Stihl br420 Blower $400.43 new $175.00
    14 Stihl br420 Blower $400.43 new $225.00
    15 Stihl br420 Blower $400.43 new $225.00
    16 Stihl edger $342.49 new $225.00
    17 Stihl edger $300.00 new $125.00
    18 Toro 44" walkbehind $3,960.87new $2,800.00
    19 Toro 52" walkbehind w/ new engine $1,000.00used $1,200.00
    20 1989 F-250 $1,200.00 used $1,200.00
    21 1989 F-350 DUALLY DIESEL $4,250.00 used $4,000.00
    22 Hedge clippers $150.00 new $75.00
    23 miscellaneous tools & parts $300.00
    TOTAL $35,121.91 $28,850.00
     
  2. ztoro

    ztoro LawnSite Senior Member
    Posts: 732

    Is he on lawnsite as well? Are you guys posting here to see what a fair price is?

    otherwise I would let him make the first offer.... If he is to high you can negotiate, if you are to high he will accept.......
     
  3. wrestlingcoach

    wrestlingcoach LawnSite Senior Member
    Posts: 251

    no he doesn't

    well what's a fair price
    $15,000
     
  4. Tider6972

    Tider6972 LawnSite Senior Member
    from Alabama
    Posts: 649

    It's his choice to leave the partnership, right?

    In what position will his action leave the business? Will you be able to carry on business as usual? Or will you be left in a bind, for leadership or labor?

    Will you <i>need</i> the equipment? Some or all?

    I would buy his share of the equipment the business needs to carry on business as usual, with growth also factored into the equation. I would pay only what I thought the equipment is worth, NOT premium prices!

    I would not be inclined to pay him for any accounts the business currently has with the exception of the contracted accounts.

    <b>MOST IMPORTANTLY ! ! </b> I would not pay him one (1) red cent until a non-compete was finalized ! I would be willing to pay him for the non-compete agreement. You have the power and control here. <i>Get a lawyer ! !</i>

    Hopefully you won't lose a friend over this, but it's his decision to leave; he's the mover in this action. It's a business matter. He shouldn't expect to profit from this move, but just to recover some of his investment.

    Learn a lesson: NO flippin' partners!
     
  5. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    If i were getting out it would take 60 - 100 k would probably be on the low end
     
  6. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    1 years gross + equipment?????? Do you like warm weather?
     
  7. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    Usually when you do a buyout its based on the percentage of the investment plus historical and future earnings paid over time.
     
  8. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    I still dont understand why you people dont believe that your compainies are worth anything. EVERY OTHER BUSINESS ON THE PLANET has a value and none of them are only based solely on value of the equipment.

    When a deli or any other retail store sells.....Do you think they only get paid for stock and equipment? They are also paid based on sales and its not a fraction of a percent either.

    A resturant established 30 years dosent give the place away when the owners retire................

    You dont sign a contract to get your coffee and egg sandwich in the morning but you are considered in the value of their business... Even though you can switch delis at any time.

    If you people arent working to build up a saleable asset then WHAT THE HELL ARE YOU WORKING FOR.. Do you really want to ride a lawnmower for the rest of your life????? I know I dont...... Im building my business to sell it in the future.... It happens every day...

    ANYBODY WANT TO TELL ME IF JUSTMOWIT SOLD RIGHT NOW THAT THE ONLY MONEY YOU WOULD PAY HIM OR EXPECT HIM TO WANT WOULD BE FOR A BUNCH OF PUSHMOWERS AND SOME RANGER PICKUPS???????????

    Ill tell you right now that his business with his systems is worth MUCH MORE than even his GROSS SALES PLUS EQUIPMENT.......

    The fact is that businesses have a value for every aspect. I dont expect to spend half my life building a company that in the end is worth salvage value on my lawnmowers....
     
  9. Tider6972

    Tider6972 LawnSite Senior Member
    from Alabama
    Posts: 649

    No one in their right mind pays for "future earnings", or "blue sky" anymore. How much are they? He should be paid for Coach's future efforts? He's *already* been paid for "historical" earnings in the form of salary and or profit taking...especially in this case, where one partner is unexpectedly bailing out, leaving the business in a management and labor lurch. Or is it your contention he should be paid again since he has decided to leave for his own betterment and reasons?
     
  10. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    YES I DO........
     

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