Buying into a business

[goatherbs]

Hi,

I have been working for a small company now for about 4 years. For a couple of years i have been toying with the idea of buying into the company because i love the industry but there is obviously a limit to what i can earn just being an employee. Also it was originally owned by my boss and his partner they have now split and he has bought her out, so he would like to have another business partner. My main question is basically methods of buying into the company for example obviously bank loans and i have been told about a method of differing your profits until you own part of the company but i am very new to all this so i was hoping people on here may be able to help. If its possible I would like an in depth (and understandable) description on all the routes i may be able to take to possibly buying into this company?

[vangogh]

Welcome to the forum goatherbs. Bank loans aren't always easy to get, but it would make sense to at least try and see if you can get one. First you'd want to talk to your boss and make sure he's open to the idea of you buying in and if so how much would he want.

There are definitely creative ways to make this happen. Once you have a price you and he might agree to let you buy in a little at a time. These are obviously made up numbers on my part, but say the total buy in was $1000. Every 3 months you pay him $100 and you get 10% of your share of the business. In 2 1/2 years you've paid everything off. In this scenario you boss might end up asking for more than what he's ask for in a single payment given he has to wait for all the money, though since he'd only be giving over a % of the business equal to what you pay maybe he would't

That's just one example off the top of my head. The truth is there aren't any hard and fast rules. It's really about what you and your boss agree is fair to both of you. I think the first step is talking to your boss and letting him know of your interest if you haven't already done so. Then find out how much it would cost to buy in to the business. Once you have that information you can determine how much of the total you could pay right away or raise through a loan and from there talk to your boss about creative solutions. Work out a payment schedule and in exchange for making your boss wait you can give back other things like not talking over your entire share right away or paying interest (basically a loan from your boss to buy in). You might offer to work more during the time you're paying him.

Also keep in mind that if you're becoming a partner you probably aren't getting a salary so make sure you get enough of a % of the business to offset that salary or maybe as part of the bargain you collect some salary while buying into the business. Again there are no hard and fast rules to this. You can be creative in working things out, though do have your agreement in writing and checked by attorneys.