Buying a niche carpentry business with key man risk

March 08, 2023

by a searcher from University of Texas at San Antonio in San Antonio, TX, USA

Does anyone have thoughts/advice on how to analyze a niche carpentry business with a highly skilled owner? The owner says that he has a number of FTEs and apprentices that are well on their way to becoming skilled enough to operate independently of the owner, but he says they have at least a couple more years before that happens.

the business specializes in a a very niche service that has little competition and more demand than they can currently keep up with. The lack of competition means that the talent pool for this service is also extremely small and each new employee must be trained for years.

Would you buy the biz with the stipulation that the owner must stay on until some of the other employees are fully trained?

Reply by a searcher
in Galena, IL 61036, USA

This is fairly common in lots of trade-type businesses where the owner is the qualified and most experienced person in the employee pool. If you're going to stipulate that the owner stay on until X-Y or Z are completed, make sure the owner is vested in the process. They will either need to legitimately be happy to stay on board for a period of time or they'll need to be financially vested, in the way of a seller's note/hold back/etc. Succession plans for us are more vital to a deal than the cost of the business itself.

Reply by a professional
from Villanova University in West Chester, PA, USA

Hi ^redacted‌! In an acquisition such as this, you'll want to have the LOI and purchase agreement include conditions for closing that there is key man employee agreements since talent is such an important component. You'd want to have the owner stay on until a solid transition can be made, and can have them as a full time or part time employee or consultant. This is something I specialize in and would be happy to help. I'll send you a DM.

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