Ask Timpo: doing a buyout

by John Timpson - Tuesday, 4th September 2007 -

You are not in a strong position: your boss doesn’t have to sell his business and, even if he wants to, he doesn’t have to sell to you. Although lots of people succeed in buying out their company, MBOs have not yet become an employee’s right.

Your boss probably loves owning the business and, despite dropping subtle hints, such as leaving brochures for houses in Barbados lying around, or invitations to the Yacht Fair, he may never really want to sell.

In any event, it’s him – not you – that has the last word on price. An accountant might tell you that a fair valuation is five times earnings after tax, but your boss has every right to stick out for a lot more, especially if the business is doing well.

If you are not yet tied to a venture capitalist, talk to a few and check whether your buyout is a possibility or a pipe dream. When you have financial support, have a heart-to-heart chat with your boss so he realises how serious you are and how much you can afford to pay.

If that gets you nowhere, perhaps you should look for another job. Even more dramatically, you could spend six months screwing up the business; when profits have dropped, have another conversation with your boss (I wouldn’t advise this course of action).

Or perhaps you should forget the whole thing, concentrate on the job you know well and get back to enjoying the rest of your life.