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To sell or not to sell?

My husband has a small appraisal business. There are six other appraisers there, two want to leave and work together, while a third might leave. He did not have them sign a no-compete agreement when he trained them. They basically have said that they would walk away unless he wanted to sell the business for a song. They could possibly take most of the business with them. My husband always treated them well, giving up work for himself when business was slow, some months dipping into savings to stay afloat. He would share profits, in the form of bonuses, even in years it was not so profitable. It is busier now with low interest rates but might slow down this winter. My husband wants to sell the business to them and work for himself. I think it might be better to let them walk away and find out it is not that easy to start a business on their own. What would the best option be?

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Answers (5)
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Aug 9, 2017
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Blue waves Media
Washtenaw County, MI

No, your husband should not sell the business. He has spent years building it and it is not right to give it up to former greedy disloyal employees. Remember they would have to start the ground up.

First thing is you undercut their prices and teach them their first lesson "101 Competition" which they never experienced while working for your husband. Your husband no longer has to share or pay them, so he can afford to lower his prices.

Since they are starting from zero, they are under more pressure to make a profit fast. Sure they have a plan, but it is rosy at best, and now they have to split profits between the two of them. Their plan might not hold water after few weeks. Your husband's business is well established with goodwill, their's is not. Yes everybody wants to save a buck, but how much can they really afford to cut their prices to the bone. They will learn the hard way, but that could be even better for your husband in the long run after they are out of business.

I might sound mean, but in business if you are not aggressive or protect you interests, you will lose your shirt to the ruthless world out there. Take a stand and fight for your rights, nobody will give them to you.

Hope that helps

Sep 6, 2010
Rick Carlson
Ace Business Brokers
Los Angeles County, CA
Premium Broker

I would immediately go into damage control mode and contact all clients and contacts in the in-house database personally to apprise them of the situation. As in personal phone calls and face to face meetings for bigger and more valuable connections. It will suck resources and time out of your husband for a bit, but it's definitely in his best interest. That way when they do leave, the relationship(s) remains with the company, and not with the individual on behalf of the company. It's a pretty crappy scenario all-around though. Not fun.

Sep 5, 2010
Julie Gordon White
BlueKey Business Brokerage Mergers & Acq
CA

This is so frustrating! An owner pours her/his heart and soul into creating a viable business that supports others and then they run off with the all that was shared. This is common in service companies and unfortunately not much you can do about it. I say let them go! In the end, the clients will make the ultimate decision. If he sells, he will have to sign a non-compete agreement, so he should consider parting ways, lowering his overhead and building the business back up the way he did before. Either way, never lose faith in humanity- you are right- it's not going to be as easy as they think and there are plenty of wonderful people out there to replace them! Good luck, Julie (jegwhite@bluekeybma.com or subscribe to my blog at www.pinkbizbroker.blogspot.com)

Sep 4, 2010
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The BAF Group LLC
MD

Never an easy question to answer. Any Buyer is going to want to price and pay for a business that is doing at least what it has historically done in the past. Two of the biggest questions a Buyer will pose are: What happens to the business when the Owner leaves, meaning is the heart and soul of the business tied solely to the Owner? That is, is the Owner the chief reason the clientele comes to and remains with the business? In that case, if the Owner leaves, the Revenue dies and the Buyer is left with nothing but a lot of debt, and no real business.

The second question in a business like yours is, what happens to the staff; will they stay; if they leave, what happens to the historical business? You and your husband have to answer that question, in a BIG way!

My suggestion is that you either take what the employees are demanding and leave. Or, if the discount is too big, compared to what you thing is available on the open market, let them leave, rebuild the business and sell at a competitive price, in a year. And in the meantime, ANYONE that remains or that you hire to replace the employees that leave, MUST be signed to a non-compete agreement!

Another way to combat the non-compete scenario is to offer a bonus to current employees that might stay for a year or 18 months, after any potential sale. This is somewhat common, but if your current employees are playing coercive games, I would think this is a non-starter.

The real key is trying to determine how much of the business you and your husband really control.

Sep 4, 2010

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