Verify level of employee involvement prior to settlement

by a searcher from University of Maryland at College Park

2 months ago

Hey guys,  how do you confirm the level of involvement of an employee in a business during due diligence? I got a business where the owner is saying his uncle and dad don’t really work much in the business but are currently there every day and from my visit, it looks like they have meaningful contributions. Anyway to confirm this type of thing?

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3 comments

intermediary from The University of Chicago - Booth School of Business

Find out why uncle and dad are there. Could be medical insurance, keep them outside the home, keep active lifestyle, etc. Also, how many other employees are there? Any manager types? Not unusual to have multiple family members on payroll. Often too many such people reduce productivity and choke growth.

2 months ago | like reply | 0 likes

professional from New York University

I've seen businesses where older family members are there a lot but don't really do much work, or the work can easily be replaced. Combination of a way to keep family members busy and a way to respect an older generation by not throwing them out, but you need to somehow get the seller to give a rep/warrantee to it and put real teeth that they won't go out and take clients.

2 months ago | like reply | 0 likes

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