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looking at buying Dads co.

Discussion in 'Business Operations' started by soccer coach, Aug 28, 2002.

  1. soccer coach

    soccer coach LawnSite Member
    from midwest
    Messages: 104

    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.
  2. bruces

    bruces LawnSite Senior Member
    Messages: 648

    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!
  3. jamesday

    jamesday LawnSite Member
    from MS
    Messages: 47

    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
  4. The Lawn Choupique

    The Lawn Choupique Banned
    Messages: 199

    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.
  5. soccer coach

    soccer coach LawnSite Member
    from midwest
    Messages: 104

    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?
  6. bruces

    bruces LawnSite Senior Member
    Messages: 648

    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.
  7. jamesday

    jamesday LawnSite Member
    from MS
    Messages: 47

    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!
  8. soccer coach

    soccer coach LawnSite Member
    from midwest
    Messages: 104

    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.
  9. Got Grass?

    Got Grass? LawnSite Senior Member
    Messages: 363

    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.
  10. bruces

    bruces LawnSite Senior Member
    Messages: 648

    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!

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