Ask the Question

cat11 · Joined: 28 Dec 2007 Posts: 8 Location: uk

Hi I am co - owner of a pre-school and the relationship with my business partner has broken down completely. Where do i stand regarding the goodwill gesture payment to buy the partner out (which they have given as the option left open.) Who do u get to value what the pre school is worth? it is run from a classroom based at a school and most of the equipment has been bought by the business. Both partners have taken exactly the same monthly wage. Is the goodwill gesture calculated on the profits to date and potential profits? I need to find out alot of information relatively quickly.

Dan · Site Admin Joined: 30 Jun 2002 Posts: 125 Location: UK

as a very rough rule of thumb, most businesses are valued on 10x the annual net profit

cat11 · Joined: 28 Dec 2007 Posts: 8 Location: uk

hi, Thankyou for responding. Could you confirm whether that is the net profit from the current year or the previous year. Sonds like a daft question but figures have been discussed on last years figures. What if the business may be leading it's way into some financal difficulties beyond it's control and may not be able to sustain it'self as of September.. does this have any bearing on what the value of the business is? Regards Cat

Dan · Site Admin Joined: 30 Jun 2002 Posts: 125 Location: UK

i would suggest it's the most up to date figures

thescruff · Moderator Joined: 03 May 2003 Posts: 4249 Location: Bath

Reading between the lines, I assume the partner knows the position and financial state, so make him/her an token offer, say 25%

cat11 · Joined: 28 Dec 2007 Posts: 8 Location: uk

Thanks all. Any chance they can offer their share of the business to anyone they want or does the other partner have first refusal? any advise about a business partner leaving a business is gratefully welcomed. Cat

thescruff · Moderator Joined: 03 May 2003 Posts: 4249 Location: Bath

Yes he can sell the shares, but it wouldn't make the buyer an director, and I very much doubt he would get very much for them. There maybe a clause in your contract that says the shares go to you all be it at a price.

I think to be honest you should have a chat the accountant, they will be better placed to value the business.

thescruff · Moderator Joined: 03 May 2003 Posts: 4249 Location: Bath

There's some good stuff in here if you plough through it.

http://www.lawsociety.org.uk/home.law

cat11 · Joined: 28 Dec 2007 Posts: 8 Location: uk

Many thanks for your time. I'll check it out . Cat