Hi all, I have an opportunity I'm considering that I'd love to get some feedback on. Any ideas/thoughts/feedback would be greatly appreciated. Here's the specs:
I own a commercial building, and have a business in place as a tenant. They have been there for 40 years. The owner is retiring. The business has been for sale for a while now; I'm considering buying the business. I have found a potential partner who knows the industry inside and out. I would be the "capital guy", and he would manage the day to day workings of the business. Initially, since he is not putting up any capital, I would be the sole owner. However, my long term strategy would be to find a way in which he buys into the business. I have my own line of work, and could not be running the day to day of the business. He is interested in finding a way to do this. He would get a salary for his work, and if performace tiers are met, a bonus. My read on the numbers states that there is room in the budget for his salary, and still have the business stay marginally profitable in the immediate future(we both want to turn the business around to be VERY profitable). My main incentive would be to keep a tenant in the building, but I am also intrigued by the idea of owning an actual business with employees, and thinking creatively about how to "rebuild" the business.
My question is this: what would be the ideal way to structure my arrangement with the partner/manager? If I do this, I'd really need him to stick around; it's a niche market, and it'd be hard to find someone who knows it as well as he does to run the business if he bailed. my initial thinking was to put him on a salary that would likely still provide enough room to bonus him out at the end of year one, enough that the bonus amount could equate to an equity portion in the business, thus incentivizing him to stick around the in business he is now a partner in.
Any overarching thoughts? Tweaks? Terrible idea? I do also have the option of just skipping this whole purchase, and putting the building up on the market for lease. It's in a pretty desirable location, and I do think I could get a tenant in 6-12 months. The meat of the financial gain for me is honestly in the tenant, but if there is a lane to make the business work, and even get a marginal ROI, and keep the employees jobs in place, and not get bogged down with dealing with too much of the day to day of the business, then I see no reason not to do it. Thanks for any thoughts!
I own a commercial building, and have a business in place as a tenant. They have been there for 40 years. The owner is retiring. The business has been for sale for a while now; I'm considering buying the business. I have found a potential partner who knows the industry inside and out. I would be the "capital guy", and he would manage the day to day workings of the business. Initially, since he is not putting up any capital, I would be the sole owner. However, my long term strategy would be to find a way in which he buys into the business. I have my own line of work, and could not be running the day to day of the business. He is interested in finding a way to do this. He would get a salary for his work, and if performace tiers are met, a bonus. My read on the numbers states that there is room in the budget for his salary, and still have the business stay marginally profitable in the immediate future(we both want to turn the business around to be VERY profitable). My main incentive would be to keep a tenant in the building, but I am also intrigued by the idea of owning an actual business with employees, and thinking creatively about how to "rebuild" the business.
My question is this: what would be the ideal way to structure my arrangement with the partner/manager? If I do this, I'd really need him to stick around; it's a niche market, and it'd be hard to find someone who knows it as well as he does to run the business if he bailed. my initial thinking was to put him on a salary that would likely still provide enough room to bonus him out at the end of year one, enough that the bonus amount could equate to an equity portion in the business, thus incentivizing him to stick around the in business he is now a partner in.
Any overarching thoughts? Tweaks? Terrible idea? I do also have the option of just skipping this whole purchase, and putting the building up on the market for lease. It's in a pretty desirable location, and I do think I could get a tenant in 6-12 months. The meat of the financial gain for me is honestly in the tenant, but if there is a lane to make the business work, and even get a marginal ROI, and keep the employees jobs in place, and not get bogged down with dealing with too much of the day to day of the business, then I see no reason not to do it. Thanks for any thoughts!
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