When purchasing a small business, how does new owner layoff manager?

[Fields of Gold]

A small business in the USA is for sale by a passive owner who employs a manager.  The business is operating near peak but the annual profit is small.  The most obvious way to increase profit for the buyer is to be an owner-operator.  This would involve laying-off the manager.  Even in an at-will employment state, layoffs can be litigious.  Definitely involving an attorney.  But for now just wanted to get a general idea of what to consider before making an offer.

[walkwalkwalk]

Sounds like you're buying a job and not a business. Just my opinion.

[dcheesi]

Are you sure that the business will continue to operate at the same level (revenue etc.) after letting the manager go? With small businesses, the management can make a huge difference in the popularity and profitability. Not saying you're not a good manager, but what if this current person is a "great" manager, and/or knows things about this particular business that you don't? You might be killing the golden goose, so to speak.

[Proud Foot]

What are the current barriers to increasing revenues and profits and what would the cost be to remove those barriers? Also determine what your interest is for purchasing this business. If you are going to be the owner/operator then you need to figure the balance of your current salary, paying yourself and profits, and the relationship to the cost to employ the current manager.

I second what dcheesi says, particularly since you say the business is operating near peak.

[Louisville]

Sounds like you're buying a job and not a business. Just my opinion.

You're saying that like it's a bad thing....
Why?

[walkwalkwalk]

Sounds like you're buying a job and not a business. Just my opinion.

You're saying that like it's a bad thing....
Why?

If you can't find a similar paying job otherwise, its not a bad thing. If you can find a similar paying job without having to spend money, then that would be preferable.

[Fields of Gold]

Would be great if the buyer had the support of the current manager in transition to new management/ownership.  Is this a situation in which severance pay to the manager becomes the main option?

[Lamancha]

I bought a business last year that was owned by an absentee owner.  It was fully staffed including management.   I assume that you are buying the assets and not the liabilities correct?  Those employees are his, not yours.  The business owner is responsible for ending their employment on the last day before the sale goes through.

I held a staff meeting/interviews first thing in the morning on the first day and hired the employees back with the full understanding (signed employee manual ) that they were new employees just starting at a new company.

If it's a service based business be careful letting managers go right away.  They tend to be the face of the business,  and you may end up with a bunch of freaked out customers.

[Linea_Norway]

Sounds like you're buying a job and not a business. Just my opinion.

You're saying that like it's a bad thing....
Why?

If the business would go bankrupt, you loose your job as well and have nothing to fall back on.

[bwall]

Sounds like you're buying a job and not a business. Just my opinion.

You're saying that like it's a bad thing....
Why?

You are paying money for the headache of owning a business with very limited additional (potential) financial upside in sight. It's better to just go out and get a job that you can quit at any time if you want to.

If your employer goes bankrupt, you can start looking for a new job the next day. If your business goes under, you have to deal with lots of unhappy people before you can look for a new job, in addition to being out the price of admission.

The biggest risk with buying a business that 'runs by itself' is that often times, it doesn't run by itself at all. If it did, why would anyone ever sell it?

[EngagedToFIRE]

Even in an at-will employment state, layoffs can be litigious.

Find out if the manager has any sort of employment contract.  If it's an at-will state and no employment contract, there is no fear at all with firing the manager.  Happens all the time, everywhere.

However, others are giving very good advice about potential pitfalls with firing the manager.  Be careful!  Especially if it'll upset customers, other employees, etc.  You may want to keep the manager for 6 - 12 months as well.