Wanting to leave my business, partner unhappy

Hi all,

I have been a new business owner for just under three years in the landscape industry. I've recently been offered a outside position that I cannot say no to. My question is, how we should settle our buy-out if he intends to run the company on his own.

My partner brought $10,000 to the table as an investment, I didn't invest any money. His investment has been since paid back. He owns 70% of the company to my 30%.

I need help with setting a value of the company and presenting a buy-out figure to him and our mediator.

I suggested to factor the business worth at $0, and take a draw, based on company shares, on the money we have in the bank and what is owed to us in receivables, ending 12/31/08. This figure is roughly $90,000 which at 30% yields $30,000. I also offered to pay half our office rent until lease end with the settled upon money.

2007 we grossed $257,000 with a profit of roughly $15,000. This year we grossed $285 with $0 profit.

Thanks for your help.

Businesses are valued for book purposes based on sales, but the value of a company is really more what the market will bear. To have made a paltry $15K on over $250 in sales says the company is not charging enough for the plants and labor. So it has been badly managed or not sold well and its value is really much less ... but did you take equal salaries?

There are other things that disturb me. He put in money and then took it back? So were you aware that you were effectively buying out his ownership? Investment is not a loan unless it was not an investment but a loan. If it was a loan, then why did he end up with 70% to your 30%? Did he supply tools?

I think it would be important to get advice the next time you attempt to go into business... from a lawyer or a CPA. The CPA can help you write a business plan.

Right now your issue is that you have a large cash position and you want your 30% of cash and A/R. Realistically, he can't give you what he doesn't have, but can report to you on those A/R accounts and give you 30% of what comes in. I guess I'd start with a cash request and take the A/R as it comes in as a final deal. You don't have much else you CAN do. It is certainly more fair than any other deal you've made here.

But don't go into business with this guy any more.