Your business has grown, thanks to the hard work you and your partner have put in over the years. Now, your partner wants to move on, and you want to buy him out.
However, despite the partnership agreement that exists, you face some snags you find difficult to resolve. Meanwhile, your relationship with your partner is becoming strained. What now?
You put together a basic partnership agreement that worked well enough because it outlined how you and your partner would divide responsibilities and operate the business. Unfortunately, the partnership agreement did not include a dissolution strategy. The main issue now is how the buyout should occur. Your partner wants a lump sum buyout, but you do not have the funds to manage that.
Considering the buyout
Your first task is to hire a professional to perform a business valuation to determine a fair price. Will the buyout be a good investment for you? Another option may be for you to take on the majority share of daily operations including making business decisions and handling financial obligations and liabilities. Taking this path would not make it necessary for you to go to the expense of a buyout. However, your partner may feel uninterested in becoming a minority partner.
If you do not have the funds to buy your partner’s share of the company outright, consider bringing up the idea of a payment plan. You could offer a percentage of equity in addition to the principal equity your partner already owns, similar to interest on a loan. However, if this is still unacceptable, you could think about selling the business, splitting the profit with your partner and going your separate ways.
Before you proceed with buyout negotiations, seek professional guidance and explore your legal options. Ending a successful partnership is a difficult and usually emotional undertaking. Keep the big picture in mind; you do not want to lose your business—or a friendship—if at all possible.