employee going to buy business from employer

[Jim Bell]

Hey Guys,

I know this is a real estate forum, but you guys are smart, so I wanted to pick your brains for some input here.

I've been at my company for 9 years now and my employer is going to retire in 5 years. He wants to sell the business to myself and one other employee when he retires (so I'll have been an employee there for 14 years at that point) We want to buy the business. We just recently got a valuation of the business based on last years numbers and here's what I'm looking at:

Valuation: $1,300,000 - $1,500,000

2017 sales: $2,344,000

2017 net profit: $300,000

Sales have increased every year since he started the business 20 years ago. When I started 9 years ago we were are $1,170,000 in sales, so we've seen some growth. It's a well established company with steady clientele. I have a meeting with my boss, his CPA, and my would-be partner next week to start talking about a buy sell agreement.

The deal would work out more or less like this: We agree to the valuation based on last years numbers and agree that my coworker and I will buy the business in 5 years when my employer retires. The valuation will be based on last years numbers even though we will be buying in 5 years and the valuation will likely be more than it is now. My co-worker and I will split a down payment of $100k-$150k and the rest of what we owe to our employer will be split up and paid to him over 5 years until paid off. All of this will be stipulated in a buy sell agreement that we hope to sign this year.

I'm completely new to this, I don't know anything about buying a business. Does all of that sound straight forward. Am I missing anything? Now would be the time to ask questions and figure things out. I'm grateful for any insight!

Thanks,

Jim