How to sell a co-owned business?

Savvy_Sue

I imagine you've looked at all possibilities for diversification in order to increase income? And all ways of reducing expenditure in order to cut costs?

pleasedelete

Doesn't sound like the business has any value. Breaks even. Does it have assets?

What exactly is there to sell?

paddyrg

As financially it makes no real difference, perhaps A can think of some things B enjoys but doesn't have time for and can use those as a carrot? B might be keeping put partly out of needing to feel useful/valid and to have some autonomy and ability to feel in charge of something. If A wants to remove that thing, might be smart for A to find something different for a disillusioned and beaten B?

paulwf

1gavinr wrote: »

In a nutshell that's it. The business has been running 2 years now and it breaks even. There isn't much money being made above paying wages and bills so it's looking like the best option is to sell rather than staying open just to break even every week.

What type of business is it please?

Break even after 2 years can be an incredibly positive position to be in...happy to write more if I have very brief details of the business setup.

antrobus

Savvy_Sue wrote: »

I don't think it matters whether it is a partnership or a ltd co: ...

It does actually.

1gavinr wrote: »

It's a partnership and not a Ltd company.

If there was a proper partnership agreement then that should specify some kind of dissolution process. If there isn't, and it's likely there isn't, otherwise why would you be asking the question, then it's a partnership at will, and either partner can serve notice on the the other to bring it to an end.

Now you might well say that you don't actually want to terminate the partnership like that, the business has some value, you want to sell it and then wind things up in order to get back as much money as possible. Fair enough, but it gives you a gun that you can point to the other party's head, although it might be better if you got a lawyer to point the gun for you.

PasturesNew

pleasedelete wrote: »

Doesn't sound like the business has any value. Breaks even. Does it have assets?

What exactly is there to sell?

I'd agree with this. The business is pretty much worthless to somebody else and you'd struggle to find anybody who would want to buy half a business set up in such a way and with so little reward.

LianneCarlaS

Breaking even after 2 years is good. It's often a long hard road to creating a successful business and breaking even is a really positive sign. It's not a time to give up because things are 'just okay' but it is the time to elevate the business from simply surviving to thriving.

To those who think it's worthless...how can you say that? If there are assets and goodwill that have become part of the company over the last 2 years then these are valuable and with some tweaking of the business model then it could be very profitable. Don't discount things based on assumptions

paulwf

It's a shame the OP hasn't had time to reply yet but basically there are broadly two types of financial models for small businesses.

A classic example of the first type of business would be a freelance graphic designer. Their overheads are very low (maybe a few software packages) so nearly everything they earn is profit. If their turnover increases by 10% their profit increases by 10%, and if turnover drops by 10% so does profit.

The second business model is one with more overheads such as premises and staff, perhaps an office, shop or factory. Lets take an example of a retailer that sells widgets. Their rent, business rates, and most of their costs are fixed whether they sell 1 widget a day or 100. Even if they don't ever open the costs keep piling up but on the other hand if they are hugely busy costs don't increase that much. Even staffing doesn't increase all that much over a required baseline level as trade grows.

For this type of business breakeven is everything. If your turnover is 10% below breakeven you lose a lot of money as your costs are mainly fixed. On the other hand a 10% increase in trade can result in a big profit.

What this means is that once a business reaches breakeven just making a few tweaks to build by 10% can bring really big gains. Partly this can be achieved by refining things based on the experience of the past 2 years - everyone makes lots of mistakes in the first year. It also suggests there should be a big push on promotion as once costs are covered every extra sale is profit. Generally a business builds sales over time and it is common to just break even in the first 2 or 3 years, I wouldn't give up in yet but it would be good to spend some serious time working how to grow the business. Getting some fresh ideas from new people and trying out some new ideas would really help.

Is it worth anything? I'd say yes, you have done all the hard work setting up the business and now have sales data and processes in place which is invaluable. Setting up a business is a nightmare, taking over an existing one will be much easier.

There's also a question of risk. Even with big brands setting up in a new town is an unknown, a new branch might be wildly successful or a complete flop. If you have enough branches the risks even out and that's ok. However for a small business buying a going concern that ticks over is a safer bet than setting up from scratch.

Another factor...if you are selling the business at a modest price that makes it affordable to a lot of people, using their redundancy money etc. In a way businesses can sometimes be too successful, for example if you make a profit of £100K a year and sell it for 3 times profit i.e. £300K that means only the big boys can buy it. The thing is though the big players don't always look at single branches so it's hard to shift.