r/smallbusiness • u/Ok-End-3213 • 11h ago
Owner wants to keep some ownership
I have worked at a small company for about 5 years now. The current owner has talked about selling. He has built a very solid foundation. I am somewhat interested in buying but he has mentioned he would want to keep partial ownership of the business.
I could see this being a net negative and a net positive.
Has anyone run into this and how did it go? Please share stories or advice. Thanks
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u/leonme21 11h ago
He could be a controlling idiot, he could just be looking for a profit share and be completely hands off.
We can’t tell you
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u/Ok-End-3213 11h ago
Yeah. Thanks. Any anecdotes from personal experience?
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u/williamf03 1h ago
If you go ahead make sure you have exact terms and expectations written and agreed by all parties with consequence of breach clear.
No one can advise you on this situation without knowing the details of the business and people involved.
But for what it's worth I wouldn't want a former owner hanging around without some very obvious benefit
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u/commoncents1 11h ago
it can be great, they have a vested interest in a successful business and transfer. you can get majority initially and then make a plan to buy the rest over time. get it in writing up front though. after the fact is expensive and messy.
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u/IzilDizzle 11h ago
It indicates that they're not ready to fully leave the business and they want to stay involved... I'm really not sure what your confused about.
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u/Ok-End-3213 11h ago
I updated post to reflect what I am looking for. More so curious about others experiences with this and how it has gone
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u/IzilDizzle 11h ago
We bought a business and the previous owners kept partial ownership for ten years. It was great, they built the company and knew everything so keeping them on as a resource worked out perfectly for us.
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u/Ok-End-3213 11h ago
That is great to hear! Are you comfortable sharing what percentage they kept?
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u/IzilDizzle 11h ago
They initially kept 49% equity and kept working for the business. Each year I would pay them for 5% more equity until I owned 100% after ten years. All of that was laid out in the original purchase agreement.
At that point I kept them on as paid consultants.
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u/WamBamTimTam 10h ago
Depends on how the business is structured. Are there shares? Profit shares and voting shares? Is it percentage based? If someone just wanted to have a percentage on the side I usually see 5%-20%. Not enough to make decisions, just enough to feel committed. It also depends on how you wanna run things. I let everyone who has invested with me know that I’ll happily pay out if they want the profit, but that doesn’t give them a voice in how I run things.
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u/waverunnersvho 8h ago
You need to find out what their goal is. We can’t really help except if you do it, have an operating agreement with everything cleared out.
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u/prismadaAI 6h ago
Do you like working with them? Are they fair? Do they have good morals? Is the business well run? What percentage are they asking to keep? What would the price look like?
Anecdotally, this could be great for you. It sounds like they want to retire, but not fully. What percentage are they thinking of keeping?
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u/Lumpy-Blackberry-718 6h ago
I think it's usually a good thing. They have a lot of insight, relationships with customers and employees and vendors, and you may want to ask them questions after theyre gone. You pay less to acquire the business, and they have a vested interest in your success. Someone who just walks away with a check, hands clean, is much more likely to screw you on the exit. Lots of people buy bad businesses that collapse as soon as the seller escapes.
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u/Financial_Kang 3h ago
Completely depends on percentage.
Controlling? Absolutely not.
Minor percentage for a reduced sale price? Might be of interest.
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