Buying out your partner gives you more autonomy over your business. But, this process of buying out a partner is a bit complicated. To eliminate potential issues in the process, it’s important to approach it with care and strategy.
If you plan to dissolve your partnership and have a question, “How do I buy out my partner?” in your mind, this post will help you.
How Do I Buy Out My Partner?
Determine what you want from the buyout
Before you begin the buyout process, know why you opt for it. By understanding your motivations and goals, you can determine your deal-breakers and assess where you can comprise. Then, approach your partner confidently.
Share your expectations
The process will get easier if you and your business partner reach a mutual understanding before the lawyer’s involvement. So, communicate early with your partner and share your requirements. Prepare yourself to answer all your partner’s questions. It’s good to document the conversation.
Hire professionals
As buying out partners is tricky, professional interference is needed. You need an attorney to guide you through the entire buyout process and help you overcome legal hurdles. Sometimes, a business accountant is also needed for the buyout process.
Get an independent valuation.
With an independent valuation, you can assess your company well and get objective information about the financial health of your business. A valuation firm will consider the financial documents and determine the market value of your business. A thorough valuation helps in creating beneficial terms for both parties.
Clarify the terms and conditions.
In the buyout agreement, a partner terms the ownership financially. But it’s important to outline its non-financial consequences as well. there should be strict terms and conditions for each partner’s roles, responsibilities, and involvement with the business post-buyout.
How Do I Value My Business?
Conduct an annual valuation.
It’s said that you cannot determine the exact value of your business without putting it up for sale. But, if your financial records are on point, you can make buyout easier. So, conduct an annual valuation, as it will help you create a baseline for future layout negotiations.
Negotiated settlements
Even if there is a base value for your business, chances of some back and forth during the buyout are always there. Some economic changes can increase or decrease the value of your partner. When negotiating, things can be stressful. But you can negotiate strongly if the numbers are solid from the annual valuation.
How much is My Business Worth?
The worth of the business depends on different factors. To calculate the cost of your business, you need financial records and details about your tangible and intangible assets. Also, you need to understand the market conditions and the value of your competitive advantage.
Three common methods to calculate the worth of your business are asset-based, market-based, and income-based.
Conclusion
Partner buyout process should be handled cautiously and professionally. You should have good terms before and during the buyout process to complete the formalities smoothly. Remember, business valuation is an important aspect of the partner buyout process, so hire professionals.
At Adam Noble Group, our experts can help you value your business and complete the partner buyout process in a streamlined way. So, get in touch with us today.
During 3 decades of M&A service, Jeff Adam has successfully completed the sale of over 825 businesses and advised or completed 1,000’s of business valuations and exit plans. An entrepreneur in his own right, Jeff has started and grown 12 companies in fields including international finance, B2B services, business valuation, construction, screen printing, Mergers & Acquisitions, engineering, and manufacturing. Jeff has donated his time as a distinguished speaker at numerous national & international conferences since 1977 covering topics such as environmental services, engineering, media, craft breweries, exit planning, business valuation, charitable giving, management, business brokerage and M&A fields.
Jeff is President of Adam Noble Group, LLC, a national M&A Advisory firm, professionally valuing and confidentially selling profitable businesses owned by exit-motivated business owners to qualified strategic, corporate, private equity, partners, management, and first-time buyers. Jeff establishes rapport, builds trust, and educates business owners in the steps to meet their goals as they prepare and achieve the discreet, confidential exit of their business. Jeff exclusively represents sellers of $1M-50M value enterprises and endeavors to transfer their businesses to qualified, capable acquirers who will build upon the seller’s vision, goals, culture, and history. Jeff maintains lifelong repeat and referral relationships with sellers, their acquirers, and service providers.
Adam Noble Group has multiple M&A and business broker specialties: Manufacturing, Defense Industry, Oilfield services, Construction trades, Craft Breweries, Partnership Buyouts, Manufacturing, Service, and Wholesale Distributors.
Our M&A advisors and business brokers are all multi-industry entrepreneurs who have successfully exited their own companies. Jeff has walked in your shoes! Jeff wants to put the BIGGEST CHECK of your life in your pocket! Please contact Jeff, and he will confidentially answer all your questions.
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