Business ? opinion

[scotty34]

Scenario, A person wants to get involved with a LLC partnership the partners discuss adding the person and there benefits to grow the co. So the topic of a buy in comes up The co has assets of about 180K in inventory , tools etc the building is leased so no property is owned. So would you say a buy in of 25% of assets would be fair ? ( currently 3 partners own the business) Currently this person has been doing side work related to his profession since his lay off from a large co, it would be a hard stretch for him to get funds to buy in.
It wouldnt be fair to the 3 partners who put in years of work and sweat to get it where it is today to just let him in without some "skin in the game" his buy in would go into the company not to the partners .
Any ones thoughts who might have gone thru something like this ???

[grandbassslayer]

Does the company have any other value? Service related companies usually have a book of business, repaeat customers, a phone number, etc. This all adds value above strictly assets. Also the other 3 investors are now devalued, they will own 8% less than they did, so they need to get paid for the shares they are giving up IMO the only reason they wouldnt is if this partner brings some strategic value or customers along with him.

[scotty34]

Does the company have any other value? Service related companies usually have a book of business, repaeat customers, a phone number, etc. This all adds value above strictly assets. Also the other 3 investors are now devalued, they will own 8% less than they did, so they need to get paid for the shares they are giving up IMO the only reason they wouldnt is if this partner brings some strategic value or customers along with him.

Yes there is a service dept and a store front dept, and a paint and fab shop. He can bring networking and web support which we are severely lacking

[grandbassslayer]

Yes there is a service dept and a store front dept, and a paint and fab shop. He can bring networking and web support which we are severely lacking

What if you hire him and give him a commission on all new work, like year over year sales increases? I'd hate to give up a share of my business without getting paid.

[Bamaman]

To me, this would be a 33/33/33% limited liability. Ownership % should come from tangible assets.

If the gentleman would like to be paid a lesser salary and buy in over a couple or three years, that's the better way to do it. Everyone needs to put some skin into the business.

[Ben Danbleume]

I would never make the deal for 25% of the tangible assets, "going concern" is usually worth as much as the assets. A business that supports three partners, might not support four.

[Bsktball55]

Will your business grow because of his involvement? My concern would be you are now splitting the income between 4 people instead of 3 so by bringing him on, you will all take a pay cut and if you aren't going to get paid for him joining on, I would not be happy.

[TampaJim]

I don't do partnerships outside of my personal life. I either own it or they pay me. I don't like fuzzy math.

[Kodiak16]

And when he forces sale?

[bkeenom]

I would let him in for 25% of 10xEBITDA when you buy a business it normally sells for a multiplier of EBITDA or revenue. Each of the three partners is basically selling a percentage of his assets and future earnings. Just letting someone in for a percentage of the assets would be a horrible deal in my opinion

[LOSTTEXAN]

Every industry and business is unique.
There is no general standard.
The proper terms for a deal is what the three existing owners and the prospective new partner can agree to.