Skip to main content
Strategies
Business Observer Friday, Feb. 14, 2020 1 week ago

How to buy out a business partner

Share
One key is to take emotion out of the process.
by: Beth Luberecki Contributor

Parents know that their kids are going to grow up and leave the nest at some point. Harry Casimir looks at a business partnership the same way. At least one of the partners is bound to want to stretch their wings after a while.

That’s why Casimir, CEO of Bonita Springs web design and digital marketing agency Atilus, was emotionally prepared to handle it when his founding partner wanted to be bought out.

“We had a decent run,” he says. “But unless you want to run that business forever, you have to separate from the business at some point. I have always had that perspective.”

Lori Sax. David Fink, a partner at financial planning firm Lifestyle Freedom in Lakewood Ranch,says early planning can prevent long term issues in ending a business partnership.

That way of thinking allowed Casimir to approach the buyout in a calm, level-headed way. “If I had one piece of advice to give, I would say to really look at the numbers without any emotion, which was something I was able to do,” he says. “Start preparing yourself now if you can emotionally, especially if you’ve been running that business together for a bit.”

Ideally, the process of buying out a business partner should start long before the moment a partner is ready to exit. Planning for the future as early as possible in the relationship can go a long way toward making a buyout run smoothly. “With some degree of planning, some foresight and intentionality of the process, when the time comes when there’s either a disagreement or something else, you’ve at least got the roadmap to figure out how you can separate,” says David Fink, a partner at financial planning firm Lifestyle Freedom in Lakewood Ranch. “In a perfect world, the partners would have had some sort of buy-sell agreement in place.”

Another key? Get a third-party valuation of the business. “The times when it can become volatile is when the partners have different ideas of what it’s worth, so it starts with an independent evaluation,” says Joe Alter, a business broker at Sunbelt of Naples and Fort Myers.

Bringing in neutral, outside assistance can also help the partners assess the different financing options for the buyout, which could include an SBA loan or seller financing. And if things are contentious, a deal often won’t happen without an impartial intermediary.

“If you can’t get along with someone and put your emotions aside, which a lot of people can’t do, bringing in outside professionals who can help to facilitate the transaction for both parties helps you end up with something both people feel equally good about — or equally bad about,” Fink says.

And sometimes that unbiased eye can show partners when a buyout isn’t the only option. Alter likes to talk with each partner separately to get a sense of where they stand both professionally and personally. Maybe one partner feels burned out but still ultimately enjoys the business. In those cases, bringing in someone like a consultant or COO to a company can help alleviate some of the pressures that led to the buyout conversation in the first place.

“We conceptualize how they could do that,” Alter says. “Many times these deals are started by lifestyle changes where they think they have to sell the business to do it. But when we see the problems they have that precipitated this, it’s usually because they’re missing a skill set in the business.”

 

Being better in business sometimes requires a road map to figure out some thorny issues. Click the links below to read more from the Business Observer’s annual how-to guide:

Related Stories

Advertisement