I have an IT company with a business partner. Total profits are about 400K/year (paid via salaries, benefits, and "perks" to the two owners). Businesses in our field sell for 4x-6x profits on the average, so it would be fair to assume the business is worth 2M. My business partner wants to retire within the next 3-4 years, but I'd like him out sooner since he no longer really contributes. My problem is that I simply don't have enough equity/money to get a collateral loan for the buy out. We have been in business 18 years so I would confidently put up my house, but with the housing market there is maybe only about 150K in equity at this point. I have most of my investments in retirement accounts, but don't want to tap into those accounts and foray the penalties (even then, there is not a ton in there). Most of our money has really gone towards growing the business. However, I am confident that I would be able to pay off a 1M note in approx 5-7 years (with interest), especially if I am not paying the partner's salary. I'm looking for any ideas to fund such a buyout. 1M is a LOT of money to come up with and I know that the partner is looking for more "cash up front' type of deal. If I cannot come up with enough, he will linger on, drawing a salary until death... I cannot have that. Banks are VERY tough to get money from now, so I'm thinking of Angel groups etc... I wish I had a rich family but don't Under my leadership, the company has really grown (profit-wise), especially over the past 2 years. I'm afraid that if we keep growing the dollar figure for the buyout would increase substantially. Any ideas are graciously welcome. Thank you all in advance.
how many % of the shares your partner have? BTW, i am interested in seeing your company that make 400k per year, it's really inspiring, care sharing some info with me?
I think your best bet is to find an angel investor. Finding a passive one will save you a lot by him/her not being on the payroll. Every major city has a local angel group. I'd find one in your area and have a chat with the people there to get a feel for the supply and demand of private investor money in your area.