Working in the business 1-3 years before buying it?

by a searcher from Brigham Young University

6 days ago

Hi all - 

I'm curious if anyone has had the experience of working in a business 1-3 years before buying it. Maybe the business had a lot of potential, but wasn't sellable and you worked there for a couple of years to make it more actionable and bankable.  If you've done this, or seen this, I'm curious about: 
- What agreements did you have in place to give you an option to buy? 
- How did you think about the acquisition price? e.g. original asking price vs. updated valuation?
- How did you know the business was 'ready' to be acquired vs. still needed your focus as an employee?

Thanks!

1 like
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11 comments

searcher from Fundação Getulio Vargas, São Paulo - Escola de Administração de Empresas de São Paulo

Some very good perspectives here. I believe this approach can be smart and effective if interests are well-aligned. It may minimize typical barriers encountered in standard acquisitions, especially when the buyer lacks firsthand experience of the business - like in most SFs. I see benefits for both sides. Some critical conditions:

1) Business Readiness: The business should not be fully ready for sale yet. If it were, why someone would hire the buyer? Part of your role would involve putting certain things in place to ensure a successful transition, which also serves as your due diligence.

2) Transparent Agreements: A clear agreement with predetermined multiples / transaction conditions based on the business's performance prior to your involvement is essential.

3) Fair Compensation: You should receive a salary aligned with your responsibilities and milestone incentives (maybe stock options...), reflecting both your and the seller's aspirations for a successful transition

4 days ago | like reply | 0 likes

searcher

Don't do it. And more importantly, Why do it? VERY unlikely to work out the way you dream. If you don't do well, seller will fire you. If you do well, seller will get greedy, if you do ok, seller will likely have a change of heart. The chances of success are VERY low. Better to find something you can control from day 1.

4 days ago | like reply | 0 likes

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