Building Trust as New Owner of a $3m Business

This was pre. You know, this became a problem with SBA.

So it. That there's an owner retains about 9% equity. There is a 19% seller note, so that adds up to like 28%, 10% cash and the rest is SBA. So 10% cash from my side, like my investment. Yeah, right, right, right.

Why did you want that? He didn't.

He was agnostic. He did not care. He could have sold the whole thing. I got the deal negotiated this way and I thought to myself, for two reasons. You know, one is I was entering an industry that I knew nothing about.

So having a partial ownership keeps the owner kind of more involved. And, and obviously I didn't know the owner as well at the time. Had I known, I probably would not have cared either.

But you know, in my mind I was like, if there is a bit of ownership left in the business, it keeps them entertained and keeps them kind of involved in the business and to answer my calls when I need to. Invested.

Literally. Correct. And secondly, that reduced my cash outflow. Initially and lesser debt that I had to absorb at the time. So I could literally, my viewpoint was that, you know, as the business grows or starts generating income, I can use that income to buy out that 10% without assuming any debt towards it.

So there is a call option in place which kind of made me feel like comfortable that let's do this and you know, less risk. It just, it's not a hell lot of rest risk, but lesser risk than. Me buying 100% of it.

It up front. Yeah.

And, and, and really it was already negotiated there. Correct. And you could rationalize just keeping it that way. Correct. For all the reasons you just gave us.

And in very importantly, you had this call option so that at any point in the future you could, you could get that 9% back at at a, at a previously agreed upon price. How is that call option structured or priced? It's a call option structured.