The $2 Million Question

I’m 41, married, with three kids under five.I’m a 50 percent owner in a successful business that pays me $290k a year. My net worth is approximately $430,000, plus my share in the business, which is worth about $2 million.In four years’ time I’ll have to find $2.5 million to buy my business partner out, or else find a new business partner. What are your thoughts? 

Clinton

You’re doing very well! But there are two ways you could still screw it up.

First, you could get a new business partner in four years’ time. In all the years I’ve been Barefoot I can count on one hand the really successful long-term business partnerships I’ve seen (hello, John Farnham and Glenn Wheatley).

Second, you could borrow a heap of money and put yourself under a lot of stress. I wouldn’t do that either. You’re already wealthy -- why risk it?

Here are the two choices that I’d make:

I’d either sell the business when your partner leaves, bank a bloody big cheque, and enjoy watching your kids grow up.Or I’d talk to your business partner in the next few months about structuring an ‘earn-out’.

That is, instead of being paid $290,000 a year, you make an agreement to earn a smaller amount each year and gradually buy him out. Why would your partner agree to this? Possibly for sentimental reasons, but primarily because you’ll pay him more over time -- they’ll share in the upside.

That’s what I’d do. Up to you.

Scott