Has anyone sold a portion of their business before?

First off depends how much you trust the buyer, mate of mine did & the buyer managed to **** both him & the business over.

If you were planning to sell at retirement, can't decide if selling part now is or is not a good idea 🤔

Cheers Dicky, food for thought.

Luckily in no rush, known the chap for a few years and he's been in the industry for a while.

I wouldn't sell. Reward him well if you need to keep him.

Guessing he'd like it cheaper as he bought clients to the business?

If you've not thought about it before that also suggests you are doing fine on your own. Buy-ins usually happen when expansion is sought and another director can bring additional skills, benefits and share the load. Or when someone is winding down and they want a slow transition rather than an abrupt end.

Just because he wants it isn't enough reason IMO. If he wants his own insurance brokerage he can set one up or buy another.

The Employer> Employee relationship is also very different to a partnership relationship. How would you feel when he starts questioning your business decisions?

Couple of things to ponder.

There seems to be a never ending stream of broker consolidation at the moment. Suggests lots of buyers. Could mean prices for businesses are good? May just mean £:$ is shite.

If you don't sell to him, he may go set up elsewhere. Or join a competitor. As BDM that means he'll have a client list.

I worked for an MGA that went through a private equity deal. The managers were apparently tied in with B shares or somesuch. After a further PE buyout, rumour has it they were comprehensively stiffed on their values by the new SLT.

If he wants in, I'm sure it can be structured in a way that means you get paid by the business and he gets what he wants. But tied into loyalty/performance.

Things to consider...

Is He is essential to the business and you are screwed if She leaves maybe consider it a great way to tie them in. If not I wouldn't unless you are feeling a bit frazzled and would like a partner to share the load.

Are they able to bring anything more to the business than they do already- if so get them to do it first and introduce a sliding scale of share sales.

Do you need to create a succession plan or are you likely to sell to a competitor when you retire.

Is there a chance they will **** the business and try to buy the lot cheaper.

Are they likely to be a dick and lord it over the rest of the team?

No problem selling a portion of your business as long as you don’t give up:

Voting control

Board seats

… and your articles and sha are not drafted badly so they screw you further down the line.

Assuming you are profitable and may want to raise investment, scale, or sell the rest in the future… The real challenge will be providing some kind of win / win around an outcome you are both aiming for. I.e in the meantime does the profit go into expansion / investment, or into your pockets. Is he going to demand the above control? Lot more to think about but if you can’t solve the above points then it’s a no go.

Many CO’s will offer stock options via an EMI scheme to employees that want in and / or sell the shares vie SEIS / EIS which will reduce his risk of you are eligible.

If the person is valuable to the business a combo of the above with vesting may work nicely for you both.

Once you've done a little research worth taking an intro call to a lawyer to understand fees involved and to think about anything you may have missed.

Disclaimer: I am certainly no substitute for a qualified lawyer that’s worked on 100’s of deals.

Following another recent thread, selling part of your business means losing part of your control.

Seek proper legal advice.

Cheers one and all.

My hunch is no but i'm going to speak to our solicitor to explore costs and contracts.

This is something i'd just never even pondered and will give it some honest thought.

I do need some cash for a possible home extension and this would cover it, but at what risk/headache.

I've always enjoyed being the sole business owner. Not sure i'd be ready to let that go.

We went through a process a few years ago where sales director who performed well (at the time) was gifted 20% shares (valuation mechanism was written to minimise his tax liability) in the early 2000's. Then when he came to retire around 2017 after basically admitting that he knew naff all about how to generate leads & convert sales in the modern digital era, we were at loggerheads over his buy out as we'd never written the exit procedure & valuation mechanism into the articles. It was a massive PITA.

Structure the whole thing properly for gods sake, but always bear in mind, that if your business processes & procedures are well thought out & robust, although great staff are essential nobody is indispensable.

Have you thought about some kind of share incentives for him/other key staff?  Less selling up and more issuing shares that might dilute your holding a bit but you may have things you can do with the rights on them etc.

I cannot emphasize how much you (and he possibly) need proper advice and not internet forum advice on something so complex from a tax and accounting point of view.

If you're contemplating a partial disposal get personal tax advice too.

Some of my colleagues do this sort of thing so I have a general awareness but very much not my expertise. My role in selling businesses and assets is at a somewhat different place in the company life cycle.

You should get professional advice from a (corporate) lawyer and an accountant.

What's a BDM? I don't know how the industry works. Is it some of advisor to a client? Because if so they might have a difficult time legally and commercially if they're supposed to be loyal to the client but also trying to push the products of a company that he part-owns...

This is something i’d just never even pondered and will give it some honest thought.

The reason to sell a portion is because you want to sell it and have a reason for doing so that either benefits you or advances the business. Someone wanting to buy it isnt a reason to want to sell it

The reason to sell a portion is because you want to sell it and have a reason for doing so that either benefits you or advances the business. Someone wanting to buy it isnt a reason to want to sell it

This is true. Work out what you want to do first - giving up 20% loses you very little control - off the top of my head the most significant thing you lose is the ability to compulsory purchase in a take over. If you want to explore it, discuss it with your Business Development guy to see if you are in the same ballpark. only then get some advice, don't piss away money getting advice on something you were never going to do.

pca - Business Development Manager

BDM

MGA

PE

SLT

BLT

CO

EMI

SEIS/EIS

Imo all those acronyms are a pita, emi is a recording company, EIS is the education in Scotland, pe gets your heart rate going and a BLT is my favourite sandwich 

What do you think your business is worth?

what does he think your business is worth?

I’ve been on both sides of acquisition discussions that have been a total waste of time because there are different numbers of zeros in the understanding.   If I had enough cash to buy 20% of a successful business I’d either want to bring an investor in to buy outright or I’d use that to go do my own thing - I can’t see why he would want to own that much, but not gain meaningful control.

pca – Business Development Manager

Ohhhh, I see. Ignore my comment then.

I’ve sold stakes in a number of startups mainly to VC’s to support expansion and access to contacts in the marketplace.

Advice I’d give is to understand their motivation for wanting to partner. Everything else will flow from understanding this.

Oh and remember it’s business not personal so don’t let friendship cloud judgement.