Buying into my company

You pay a % of what it is worth, IE how much is it making? What value does it have? You can't pay £50,000 for 50% of the company, then that would mean it is worth £100,000.

What it's worth is basically a figure agreed between you and the vendor.

on a business this size - and with only one piece of information it is impossible for anyone to give you a meaningful answer.

To get closer to an answer you'd need to look at

- trends
- order book / recurring income
- Intellectual property / brands
- Assets / liabilities
- Reliance on individuals / customers

That list is far from complete, but it's a starting point.

Apart from that GET A SHAREHOLDERS' AGREEMENT!

Agreed get a shareholders agreement - its easier to work things out now while you can still talk than in a few years when you disagree.
The forums are lousy with businesses whose directors and shareholders disagree and there's no process for resolving things, no process for buying or selling shares etc.

A shareholder doesn't get given much information and doesn't run the business. You can benefit from the sale of the business and can benefit from dividends issued, if any.
And if the business goes under your shares may result in no money for you.

james2004 said:

... its not an MBI as such? we have a good relationship overall.

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Not an "MBI". I love that!

My take: the business is worthless. It's a one man band (main asset = that one man. If the other two were critical, they'd be shareholders, IMO)

And it is not making a profit (£10K doesn't count as profit, it's so close to zero that it could be wiped out by the smallest business risk. And the owner probably doesn't take a market wage anyway so I bet this business is actually making a loss!).

Why on earth do you want to invest in this? And what share? A minority (without control)? A 50% (always a nightmare ratio as we see regularly on these boards)? Something else? Did you get advice on the rights of shareholders at different shareholding percentages? And on what terms you need to have in the SA to protect your interests?

Are you going to be a director? If not, the idea becomes even crazier! You're putting money into buying a minority share in a loss making business where you have zero control? That's a recipe for disaster.

If you do invest, spend a few thousand pounds researching the business, the accounts etc. Spend a few more thousand drawing up legal docs like an SPA and an SA. Buying even a share of a business is a matter for proper professional advice, not doing it on the cheap!

If I were you I'd stay a contractor and keep it simple.

Just a thought - you buy shares from the owner. Great.
Owner gets money and you get shares.
Now what? The business is as you see it - the owner isn't required to put more money into it.
In fact he could take the money and then leave the business - leaving you to pick up the pieces - and wouldn't be doing anything wrong.

james2004 said:

I take offence to your comments....I didn't come here to have abuse hurled at me.

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Bloody snowflakes everywhere today!

Is it national snowflakes day or something? Did I miss a news announcement?

It's not abuse, it's a realistic assesment offering a valuable contrast to the 'rose-tinted-glasses-combined-with-blinkers' worldview that is so common amongst new entrants to business. Think yourself lucky it didn't come with an invoice attached, as any reputable business advisor would have given you similar advice.

Let's be realistic (again). The business is two years old, a start up, with barely any assets. If you knuckle down, using contacts you already have, you could set up something similar in a year if you have money to throw at it (which apparently you do). Then you'd have full control. Happens in the catering industry all the time- I know two examples locally of catering employees who have gone their own way and taken half the customers with them as the owner took their eye off the ball. Same with hairdressing.

Speaking from experience, one way forward here if you are both keen might be a loose profit share agreement for each job. Cost the job, add profit, pay each guy market rate for what they bring to the table (food machines? I have no idea), and then split to profit 60-40 in favour of whoever found the job. Still plenty of ways you can fall out like this but it's be a start.

If most of the 'assets' are things like a customer list, it gets murkier. Give us some more detail upon your business?

james2004 said:

Thanks, everyone else for your constructive comments. I think that's a sign off from me on this forum, which is a shame its been useful before but I didn't come here to have abuse hurled at me.

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Best of luck. You asked for opinions, you got them.

"Another one bites the dust..."