Forums: Discussions for entrepreneurs and small business.

Hello,

I am going to spin off a new branch of a franchise away from my father in law and his brother, they are basically living off me currently.  They are willing to let me do this, and take several key clients with me, but they are also fairly greedy and will want to keep as much as possible.  Can anyone suggest some steps to negotiate such a situation?  They want me to stay on, but I am a much more sophisticated business person (by far) and need to spread my wings.   I can run loops around them if I was not constrained by their 1920`s style of pinch a penny, no training, no risk, no investment, lack of goals, direction, plans etc.. 

I don`t have the needed capital to startup on my own, so I really need their help, but don`t want to give up the farm.  I could probably be just fine in less than 1 year, 18-24 months FOR SURE.

Any advice to get them to the table, steps to negotiate a parnership, etc.  I don`t know where to start, and surely can`t rely on them for any advice.

A) Should I offer to "buy my clients" from them?

B) Should we go 51/49 in the new corp, they provide startup/operating capital, I provide sweat for 2 years?

C) ?

We don`t need a lawyer, they do have a good lawyer and I have one lined up when needed.  I am not yet to the operating agreement stage, I need to talk numbers first.  We can hash out the operating part once the numbers are lined out.

Thanks,

what does the UFOC say about the arrangement?

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

I used the term franchise to best describe the structure.  It is not really a franchise, but more of a licensed co-op, really insignificant to the negotiation situation.  The company has approx 60 independantly owned offices around the world.  The leadership of the "corporate" office is very in favor of me opening my own location.  I am one of the company`s top sales producers in it`s history, and they know I have had to fight constant uphill battles to even accomplish this success.  I not only have to sell the services, but provide them as well.  I could go into the all the reasons I am going out on my own, but don`t want rag on my current employers, they are great guys, they just have ZERO business sense or skills. I could double or triple the business here, but they won`t sell it to me, and frankly my wife and I don`t want to live here anymore either.  So opening a new office in a much more desirable city appeals greatly to us.  We just need to figure out the negotiating to get it done as appropriately as possible, considering the unique circumstances.

good luck with that.  sounds exciting.

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

Anyone, a little help? Any rules of engagement or basic strategies for negotiating a partnership? good books? rules of thumb, etc.

I am at a total loss at how to go about this, and as stated my partners have NO clue what they are doing so I can`t just follow their lead.  I really need to lead and win this negotiation.

thanks in advance...

I agree with James, this does sound exciting. Unfortunately though, I really don`t have any good suggestions for you. I`m surprised you haven`t received more of a response in the last month. Has anything changed since your last post?  

No, and I am days away from sitting down with the other parties.  I am looking at the following.

a) buy some of my current clients (how much should I pay??) since all I would buy is the client, no hard assets, no human capital, etc., I am thinking like $.75 per gross profit dollar projected (based on past annualized revenues)?

b) open my own branch and stay on as commision only for a period of time with my currently employer (what percentage should I get ?) I am thinking about 25% of gross profits, I will basically service the account, get involved when needed, and do what`s needed to keep the client onboard for a period of time until I make more money at my branch or convert the clients to mine branch.

c) partner with my current employer in the new office and do a sweat equity buyout over time on the new business. (what period of time, how much should I pay, if anything?)

anyway,  no clue what to do, I can run a business, sell ice to an eskimo, etc, but have no clue how to negotiate the purchase or sale of a business.

FG

Hello, THANK YOU !!  that is exactly what I was looking for, some way to quantify the value of my various option given the somewhat unique situation.  Many of my key clients will demand to come with me.  Some clients are too high maintenance for me to take with me, however several will be highly desireable and worth buying.  We have sales territories so the clients don`t have complete free will, however many are in open terriritory.  The corporate HQ won`t allow me to open my business unless my current employer signs off and gives me permission.  So one of my ideas is to "buy" that permission, but at the right price, of course. 

Now, generally speaking, are there any quick calculators to value a business in standard form?  ie: gross rev = $1MM, gross profit = $200k, NI = $50k, company is worth $250k

thanks everyone for reguvinating my thread, our first meeting will be this week, one of the two existing partners is tied up on a project ending tomorrow!!

anyone want to start a really hot thread? and help me negotiate this in real time, that could be fun, I am up for it...I really need to win this in a big way.  If so, I can post more details on the business, my current situation, etc, but otherwise it would be real boring to most people.

thanks,

FG