Looking to take over a service business from current owner. He will help maintain machinery and teach me as needed. I have worked with him for several years, the business can be very profitable. He needs to do less physical and more mental/office end of the business. He is asking for 18% off the top of every job from current customer base in the future. (Most jobs run at less than 20% cost for materials and overhead, so I could still pocket 60% after paying him and materials.)
Plan is for 5 years, I pay him 18% of repeated business, anything I find on my own, he gets nothing.
Does this sound reasonable/comparable to any situations you may have heard?
Seems high to me, but also great opportunity to make more than I currently do, and if I can bring in more work, what is there to loose, right?
#1. "RE: Paying %age for business" In response to Reply # 0
I don't see a problem with the percentage, HOWEVER, are you going to own it at the end of the 5yr period? If so, it's a great way to buy a business with nothing down, in effect using sweat-equity. If this is the case, before you agree to the deal get an attorney to generate a buy/sell agreement that spells out the terms in detail. The last thing you want to have happen is to work your butt off for 5yrs only to find he still owns the business and you're still the employee.
Don't go any further without an attorney...if he balks at this, you should have doubts about how good the deal really is. Good luck Denny
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