Hello,
I’m looking for opinions on a project to progressively take over the SME where I work with a colleague.
The company generates approximately €2.5M in revenue.
My colleague and I already handle a large part of the daily operations: quotes, deals, organization, purchasing, clients, problem management, etc. The current owner is now quite uninvolved in operations.
The proposed project would be as follows:
promotion to management position with greater responsibilities;
compensation to be redefined (no one is talking about it at the moment)
bonus of approximately 7.5% of EBITDA each;
possible entry into capital in approximately 1 year;
complete takeover eventually.
Currently, the company has a valuation of approximately -€76k according to the calculation presented, while the seller’s ambition is to eventually reach a valuation close to €1M.
This is where we have several questions.
First, I sometimes have the feeling that the arrangement amounts to having us create the company’s value ourselves, and then making us pay for that value during the takeover.
My colleague and I have already identified several quite concrete levers for improving profitability and EBITDA. By analyzing the current operations, we mainly feel that the company’s difficulties don’t come from a lack of activity or commercial potential, but largely from management choices and decisions made by the owner.
Second, what compensation would seem appropriate to you for two employees who become managers and progressively take on operational responsibility for the company? I’m currently around €2,680 net/month, my colleague approximately €200 more.
Third, if entry into capital is planned in one year, should the conditions be negotiated and contractualized now? Price, valuation formula, percentage, timeline, etc.
Finally, we have another problem: the owner tells us he wants to progressively hand over control, but continues nonetheless to make certain important decisions that can directly degrade EBITDA.
However, our variable compensation and future valuation would be based precisely on this EBITDA.
How do we manage this point? Can we reasonably accept a bonus and future valuation based on an indicator we don’t completely control?
For those who have already experienced a progressive transfer:
does the arrangement seem balanced to you?
what would you ask for in compensation?
should we secure the planned entry into capital in one year right now?
how do we frame the seller’s decision-making power during the transition period?
what would be the main points of vigilance for you?