Employee to buy the business question

[themoz]

All:

I've lurked here for a while have have enjoyed the wealth of knowledge. I've finally come across a unique situation that I can't find an answer to by using the search tool.

Question: What aspects need to considered when contemplating a "job offer" in a management role for a new branch of a business that I would have to option of buying in 3 to 5 years?

Background: I have been recruited by a small business in another state (because of my background) who wants to hire me as a branch manager to grow a new branch of their company in my area. They are a wholesaler/supplier to their industry which has had good growth (construction related industry). They also want me act as a part-time outside sales person because the do not have much of a presence in the area, are starting the branch on a shoestring and need someone with a strong ability to grow the area. There will also be 2 other full-time sales people to start. They are "toying" with the idea of giving my 1% of this branches equity per year for the next 5 years to sweeten the deal. They will open a 4000 sq ft warehouse in the area now and expect to double that size within 5 years.

A "paycheck" isn't what interests me about this offer (I can work anywhere for a paycheck), it's the option to buy the branch in a few years then make it an independent company. But.... It seems VERY unwise to take the position- "we'll work out the details when the time comes". I guess I also feel that if I line their pockets until they decide to sale, I should relize some benefits from that.... like a reduced price, etc. Dunno? BTW, the owner in selling in a few years to retire.

So this brings me back to my question: What do I need to add to my punch list to insure things are tied-down with them so things go smoothly and should I decide to buy the business later on, it will be equitable?

BTW, I've started a couple of other business in the past so I am familiar with what it takes to be a successful business owner.

THANKS IN ADVANCE!!! TheMoz

[akula]

moz, good question. you're looking at an MBO type scenario.

"What do I need to add to my punch list to insure things are tied-down with them so things go smoothly and should I decide to buy the business later on, it will be equitable?" is a function of various terms and warranties in your contract, which are the result of BATNA.

any further comment would border on inappropriate legal advice

my suggestion to you is to familiarise your self with a number of MBO case studies available at http://www.google.com.au/search?num=...G=Search&meta=

if anything - keep in mind that MBOs are a standard transaction, which most commercial law firms and merchant banks can readily advise you on

that said, you may need to talk to a financial advisor so as to weight up your alternative opportunities and how they relate to your financial objectives / risk profile

i.e. MBO may not be the way to go....huh..that rhymes