5 Things to Consider When Buying Out Your Business Partner

Having a business partnership can be great but there can also be bad times as well. Some of them will come to an end and might end in a good way or bad way. If you are considering buying out a business partner, there are a few key points that you should keep in mind.

Previous Agreements

If the business was set-up correctly, a buy-sell agreement should be in place. This should be your first point to go through when one partner considers leaving the business. Sometimes, a business partnership agreement is not always created since the business is built on mutual trust and respect due to having family or friends as business partners. In this case, if the business partnership breaks down in a bad way, this can get complicated and messy.

The Business’s Value

You need to come up with a value for their share of the business, if one partner does not want to be involved anymore. Valuing a business can be hard because it is not just assets, income, or liabilities. You need to consider the growth potential and any impact the partner leaving will have on the business.

The Future of Your Business

If your business partner wants to part ways, it could make the business appear more or less valuable. The business partner’s value is normally determined by how active they are in the day-to-day running of the business. If your partner was hands-on, you will need to figure out how to fill this gap in your business. Will affect your sales? Do you need to find another partner? Will you have more work to do yourself, or will their absence allow you to grow the business in a new direction? You have to determine how you can keep the business operational in their absence.

Financing the Deal

In some situations, if you do not meet all the lending requirements, partner buyout financing can be tricky. If the business model stacks up and you get help from a financing professional, you should be able to achieve your goal of buying out your business partner. If you are serious about assuming full ownership of your business, partner buyout financing might be necessary for you.

Making it Official

Once all the agreements have been put in place, you need to make the buyout official, which involves completing all the paperwork necessary. Your ex-business partner might be a friend, but you do not know what the future looks like. You should have all parties legally sign the parting documents.

The Bottom Line

Buying out a business partner can seem daunting but if you follow these steps, the process will be smooth and easy. The more professionally you can remain, the more quickly and easily you may be able to complete the buyout process and get back to building your business.