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Ask Dave

Buy-Out Offer

Scott wants to leave his company and receive his fair share of the business. Dave tells him how to pull it off.

QUESTION: Scott in Indiana has been in a partnership for the past six years. The business started failing after three years, and now he wants out. Scott asks Dave how to leave and still receive his full share of the company. Dave wants to know just how much he will get from the failing business.

Dave's ANSWER: The deal is not shaky if he pays you out of cash flow instead of borrowed money. This is how these things usually end ... badly.

I don’t know how much emotional energy you've got in this situation, but I'm going to continue to push on this situation. I may get everyone in the room because I think your partner is good-guy-bad-guying you. I think you, the supplier and the partner need to sit down in a room and talk about how this is a simple math equation.

You currently pull $100,000 a year out of this, yet they don't consider it a drain on this business that is supposedly unstable. If you walk away the year after he pays you $100,000, he is much more stable. What sixth grader can't grasp this? I’m going to put them both in a room because I think he's screwing around with this.

I think he's lying. I think he's saying the supplier is going to do this. In two minutes on the radio, I got the concept of this and I'm no rocket scientist. Sometimes the way to solve a good-guy-bad-guy situation, which is how this feels, is to get the bad guy in front of you. Good-guy-bad-guy evaporates in front of you. It's like at the used car lot when the salesman says the manager will never go along with the deal. Well, get the manager in there. That's what this feels like: position selling.

Sit them all down and take a couple of runs at this. Tell them how you've put years of your life into this and it makes $100,000 a year, so this has a value. It's reasonable to come up with something, and the $20,000 they've come up with for you is laughable. We're talking about just a couple of months of income.

For you to be bought out by one year’s cash flow is pretty good for the other guy. It's usually a little more than that. If I were buying it as an absentee owner for $100,000 and I'm making 20% on my money, that means it's worth half a million. For you, $20,000 here is laughably insulting.

I would call their bluff. I think they are counting on you being so nice that you are willing to walk away from a half-million dollars or something to save someone else's job. They are sitting somewhere having a beer and laughing over this. I could be wrong, but get everyone in a room so you can see the spirit of what’s going down.