Buying out a Business Partner?

[Groves]

Originally Posted by Phobia

A business is worth roughly twice its annual profit. If the profit is $30k, by all means give them $15k. Otherwise, they made a bad investment and they should learn from it. They're the ones moving. If they want to stay and work the business into profitability then they should do that. Otherwise they should spend $300 on a community college business course.

or a Math course, apparently.

[MOhillbilly]

Read the book Sammy the Bull put out. It's full of hostile takeover tactics.

Originally Posted by Groves

or a Math course, apparently.

They have to account for the money the lady is skimming.

[Saul Good]

Originally Posted by Phobia

A business is worth roughly twice its annual profit. If the profit is $30k, by all means give them $15k. Otherwise, they made a bad investment and they should learn from it. They're the ones moving. If they want to stay and work the business into profitability then they should do that. Otherwise they should spend $300 on a community college business course.

The two times profit rule is a decent starting point, but it is FAR from a hard and fast rule. Even then, it is important to include the value of hard assets, subtract out debt, etc.

It may not be applicable at all in circumstances where the owner is so tied to the business that the profits will be disproportionately impacted by the transfer of ownership. For example, some chick can have an adult web site where she sells memberships to watch her do porn shows. I can buy her site for 2x profit, but I'm not going to be able to replicate those profits on my own because she was the product, and the business was little more than a vehicle to deliver the product to the customer.

[ghak99]

These situations suck!

Input costs are meaningless and the current value of the business is the only thing that matters. Total the assets and offer market value for their half if they're willing to release the brand/logo/identity in exchange for you taking over the lease. If they decline, make it clear the doors are shutting and they can either buy you out or everything will be liquidated.

If the business model is sound, take what you've learned and go at it alone with a new and improved brand/logo/identity.

I actually had them counter with the offer I made them. 6 months later I had a much better logo/identity up and running and they folded up shop knowing they ****ed up. I didn't really know it at the time, but getting the chance to start fresh with my own image of the brand was what I should have pushed for in the beginning.

[Simply Red]

i think you should ask PostalChief.

Heh. I realize my math was hasty (and backwards) but the point was that the business is not profitable. Zero x 2 is still zero.

[HayWire]

Seperate yourself, have an independant consultant look over the financials, separte yourself, get advice from a proffesional in the field, seperate yourself, go over results from the financials/professional.

It's business, shit happens.......get professional advice and make a decision from there.

[BossChief]

Make 3 investments

A match
3 gallons of gas
An insurance policy

[Simply Red]

I'd definitely consider murder here. Do you have a chainsaw NewChief?

[Buehler445]

If it were me I'd offer what you think you can make work. If that's $14, offer $14. If they don't want it, liquidate. You can always start your own business. That's basically what you're doing anyway. Unless it is a legal entity and the name is filed with the state, you can even use the name.

Operate it like a business, don't get married to it.

[DaneMcCloud]

Originally Posted by Buehler445

If it were me I'd offer what you think you can make work. If that's $14, offer $14. If they don't want it, liquidate. You can always start your own business. That's basically what you're doing anyway. Unless it is a legal entity and the name is filed with the state, you can even use the name.

Operate it like a business, don't get married to it.

In California, you can't you start a business without a DBA or LLC. I have city permit filed as well.

Is that not necessary in other states?

[Buehler445]

Originally Posted by DaneMcCloud

In California, you can't you start a business without a DBA or LLC. I have city permit filed as well.

Is that not necessary in other states?

Not necessarily. My person farm doesn't. Lots of schedule C type enterprises don't. Only if it is a separate entity.

[Amnorix]

Originally Posted by DaneMcCloud

In California, you can't you start a business without a DBA or LLC. I have city permit filed as well.

Is that not necessary in other states?

Well, it's certainly not JUST those two. Certainly you could form a C Corp or S Corp or various partnerships.

I don't know the rules in California, but the normal rule is that you can have a business whether or not you formally file any kind of paperwork with anyone. The paperwork relates mostly to tax obligations and legal liability issues, as well as ownership of assets being vested in a third party rather than individuals, etc. etc.

[munkey]

Originally Posted by Buehler445

Not necessarily. My person farm doesn't. Lots of schedule C type enterprises don't. Only if it is a separate entity.

What's a "person farm"? Is that like pizza on a plant?