How many ways to approach this?

Question

I want to hear any creative, out of the box, or even wacky ideas of how to offer value and take over someone's business who wants to retire.

Let's say you have a couple of family friends that want to sell their business and retire. You don't have the money to buy it and they won't be able to sell it in this current market for the price they want. It is a simple business that just rents out yard space and office space to different commercial tenants so you are willing and capable to take over operations and try to develop the business further.

If your aim was to get experience, earn goodwill, make a little money, take all burden off of them (so they can mentally retire), and one day buy the whole business from them...

1. What would you propose to them to get your foot in the door?

2. How could any type of mutually beneficial setup be accomplished?

3. Any creative avenues to explore or things you have done/seen in the past that could be applicable in this situation?

Not sure if this is enough info to go off of but trying to keep it short and not ramble on needlessly. If you want to see the specifics of this exact situation, it is at the link below. Thank you!!

https://www.biggerpockets.com/forums/32/topics/1070617-prepping-for-my-first-pitch-to-investors

Bruce Woodruff · Answer

I would offer them a partnership of sorts. Have them give you a smaller percentage of the profits, like 30%, to have you step in and run everything. Everything. So they can step out of the picture and enjoy life. Use these funds as a down payment of sorts. Like a Lease Option when buying a house.

Now, if you have some $$, throw that in the mix and become a partner. Now you own a % of the business, plus get a % of the profits. After a set period of time, you would buy them out entirely

Jared Haxton · Answer

@Bruce Woodruff I am setting up a call with them tomorrow to introduce the idea. :) Sent you a message to connect since we are in the same neck of the woods! Thanks!

Bruce Woodruff · Answer

Like this - "I've been hearing you say that you are done with working and really want to relax, enjoy life and travel. I am the guy that can make that happen for you. You can trust me to handle the business better than anyone else can. Let's figure out a number that is fair to everyone and then you guys can take off and see the USA!"

BTW, I am in the Prescott area too.

V.G Jason · Answer

Tell them you're interested and you want to make this happen. If they're receptible to that, negotiate with them on how to make it work. Clearly, you sound interested and that alone is the most encouraging thing someone as a small business owner that wants to give away their business wants to hear.

I gave my very first small business away to the 7th employee I hired there. She was fantastic from the get. When she saw me get chewed up time wise in other businesses, I could tell she was trying to make her move to see if she can take over. I finally let her, and she came to me one day and said what would the process be to own this. She did not have the money, but she had the time, ability, and I knew she could make it work. We made an agreement to eventually let her have the place. I think as you get older, seeing it evolve and passing it on really makes you appreciate what you've done.

Obed Calixte · Answer

There’s two good ideas above.

What’s their reason for selling? Is it solely to retire out of the business or do they need the money?

Understanding their objective will help guide you.

Eliott Elias · Answer

Owner finance the real estate from them with no money down. Pay them a chunk of cash every year as incentive

Jared Haxton · Answer

@Bruce Woodruff

@Eliott Elias

I quoted you above but not sure if it tagged you. So tagging now. Thank you!

Jared Haxton · Answer

@V.G Jason Thanks for sharing that example. I would love to hear more about the mechanics of the deal you arrived at with her! What did the arrangement look like? What residual benefits did you receive from it? Anything you would have changed about it or might do differently now that some time has passed? This sounds like it could be very similar to the situation at my doorstep here. Very interested in how it all went down. Thanks!

Jared Haxton · Answer

@Obed Calixte They don't seem like the are on hard times and really need the money. But they have expressed that the idea of selling it and "riding off into the sunset" would be a pure bliss scenario for them. They are in their late 60's and 70's and ready to be done with running anything. So I am thinking about how to frame a scenario where they check out completely, I run everything but there is still profit in the business because we would own all the assets at the LTV and rate they are financed at. Any ideas on that? Thanks!

Jared Haxton · Answer

At first they seemed closed off to financing any portion of it themselves. Now that more time has passed and I haven't had any bites from interested investors, they are more open to the idea of partial seller finance. Is there any type of loan that I could use to just buy a portion of a hard-to-value business like this where I could use a loan to just buy a portion of the business and have the seller finance the rest? Thanks!

How many ways to approach this?

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