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Ask Dave

Doing Business Without Debt

Duane should take a percentage of the profits above his living expenses to pay the original owner of the franchise he wants to buy.

QUESTION: Duane wants to by an auto parts franchise from an older gentleman in his town but does not want to go into debt to buy it. Dave says he should share a percentage of the profits with the current owner for a set number of years to pay for the business.

ANSWER: I would not borrow the money to buy it or go into a partnership, not even with him. If you look at the books and feel comfortable with the profit margin, and you can make a living out of it, then take what you make above living expenses and share a percentage of the profits with him for a certain number of years as his method of getting paid. I have no problem with that. If it doesn’t make a profit, then you’re not obligated.