Business sale - avoiding tieins

[john_p]

Possibility is around the corner of business being sold.
The buyer wants a 3yr tie in (earnout / contract employmented time)

I don't want to be tied in for 3 yrs so was looking at negotiating some sort of hourly or part time contract after say 1 year/18 months handover .. but do you think making myself look less important for the business weakens or strengthens the business case for purchase? (I do a technical / design role, but the business practically runs itself in that area, good staff + systems in place)

This is complicated by the buyer's 3yr stipulation on earnout though (profit share related)

Any feedback either way? Am I being unrealistic?
Any comments either way?

[anonymous-user]

Most buyers would expect some commitment on your part I think. I'd certainlt be wary of a seller who seemed like he couldn't wait to get shot of the thing! Having said that, if I was selling a business i'd like not to be too tied in as you can never tell what direction a business can take under new ownership!

Surely a tie in deal will give you more financial security, maybe that is not an issue? If after a period it is not working with you there, or you become surplus to requirements then i'm sure you could renegociate.

[srebbe64]

It all comes down to the price you’re getting for the company. The three things which effect price are “risk” (the lower the better), “profit” (the higher the better) and “bidder competition” (the more the better). An earn-out / tie-in reduces the risk to the buyer so you should expect to receive more money for the business.

If I were you I’d definitely try and make myself look less important to the business – owner reliance is probably the biggest hurdle to selling a business. Also, if the buyer knows that they’re the only prospect, it puts you in quite a weak negotiating position.

[john_p]

Thanks guys.
I realise it's a balance between looking required (in the short term) and eventually integrating one business into another (in the long term)
I just don't want to be tied down anywhere for 3yrs, certainly not when I'm not working for myself.