John’s employees help him, and themselves.
Case study 01 :
My client John, owned a very niche business, let’s call it ‘XYZ installations’, relating to supply and installation of ‘a special material’ in the entertainment industry. It was a small operation with a handful of employees.
(The names of the business and owner have been changed for confidentiality reasons).
John was getting on in years and had been trying to sell the business for a couple of years but was not having much, or rather any interest at all. His employees were very dedicated and experts at what they did. He also had good suppliers of material from overseas that the business modified to suit local needs.
We met for an initial conversation and decided to keep talking. I was initially intrigued with the story, but soon realised that it was indeed a ‘highly specialised’ niche field, and that it might be hard to sell.
During our next meeting, I asked if the employees were interested in staying on if John sold the business, to which he replied that they would, and so I tried to dig deeper and asked if he was unable to sell the business what were his options? He said that he would have to shut it down *. He further shared details of some recent health concerns that kept him from being able to devote time to the business.
I enquired if he had asked his employees if they wanted to buy him out perhaps? To which he replied that none of them had the funds to buy him out. He had not specifically raised this with any one in his team.
John and I remained in contact, and it was disclosed that no one out there was even willing to buy his stock at fire sale prices. I asked him about a meeting with his employees. His three staff were all individually unable to buy the business, but in the meeting, I asked them if they would be able to find new jobs easily, to which they replied that as they were all older men in their fifties and one in his sixties it would be very difficult.
So, after consulting John, we met with the team again and I asked them if they could run the business as a group, and were they open to buying the business on terms that seemed fair to everyone ?
The result was that they all did their own due diligence with their accountants and consulted the firm accountant. It was agreed that the three employees would buy and run the business but split the profits four ways with John receiving a regular monthly income during his lifetime, however, if he passed away his beneficiaries (son) would receive that for a period of 10 years if the business was still functioning. John also received a lump sum of $100,000 for the assets which he was able to contribute to his superannuation.
It has been two years since, and John has retired but continues to receive his share of the income regularly. The business did struggle during the pandemic but has since picked up more work and they have also employed a young salesperson on a commission only basis.
*Note: The original advice from the accountant and his own son was to just sell stock and machinery in an auction, which was projected to get him about $50,000 max.
In this case, my role was as a facilitator, presenting options to John and his team, the eventual solution took a few months as each person consulted their own families and did their due diligence. Pressure was kept to a minimum, but everyone clearly understood what was at stake and the costs and benefits. There was no corporate jargon, just simple coming together of minds and reaching a mutually beneficial consensus. (Disclosure: several cups of coffee were consumed during the process).
– PMreview
