Hi, all, I'm hoping there are some small business owners or finance people that have experience. A friend and I have been discussing the purchase of a small business. It is a tech firm that sells and services POS devices. The owner is retiring, and he is trying to sell the company. The asking price is around 185k, annual revenue is 450K+, and the cashflow is around 130-135k.
If we did this, I'd be paying 100-110k out of pocket(60% ownership), and then my friend and I would be on a joint note payable to the owner for the remainder. He would be managing the business, and would be paid a salary. He has an option to use some of that salary to help increase his overall stake past 40%, or he can be content with 40% ownership. The business has been around since the late 70's, and has a lot of longterm clients. New blood, it seems, would really help to grow the company to include many new customers.
My friend and I (lifelong), have a pretty long experience with POS devices and software (he longer than I) and IT. He will be getting his MBA during this time frame as well, and I will be in law school. He's willing to put the MBA on hold and quit his job if this pans out. I'm going to continue on with my career, and I prefer not to have much say in the daily operations and management side of it all. I'm wanting to be a fairly silent investor, as I have much more to concentrate on. He has business experience, and I'd trust him with my life.
Thoughts? I'm supposed to talk to the broker who is selling the company tomorrow. My only current concern is the looming recession... although that may mean any borrowed capital might be cheaper (even though the owner would like to finance any part not paid in cash). Finally, the owner is willing to do training, stay on as a consultant/employee, and do whatever until we are comfortable. We'd be keeping the same clients, employees, etc.
If we did this, I'd be paying 100-110k out of pocket(60% ownership), and then my friend and I would be on a joint note payable to the owner for the remainder. He would be managing the business, and would be paid a salary. He has an option to use some of that salary to help increase his overall stake past 40%, or he can be content with 40% ownership. The business has been around since the late 70's, and has a lot of longterm clients. New blood, it seems, would really help to grow the company to include many new customers.
My friend and I (lifelong), have a pretty long experience with POS devices and software (he longer than I) and IT. He will be getting his MBA during this time frame as well, and I will be in law school. He's willing to put the MBA on hold and quit his job if this pans out. I'm going to continue on with my career, and I prefer not to have much say in the daily operations and management side of it all. I'm wanting to be a fairly silent investor, as I have much more to concentrate on. He has business experience, and I'd trust him with my life.
Thoughts? I'm supposed to talk to the broker who is selling the company tomorrow. My only current concern is the looming recession... although that may mean any borrowed capital might be cheaper (even though the owner would like to finance any part not paid in cash). Finally, the owner is willing to do training, stay on as a consultant/employee, and do whatever until we are comfortable. We'd be keeping the same clients, employees, etc.