Hello, I have always looked into getting FI by working and investing in stocks but this opportunity came up to become a partner with the pharmacy I work at. I am the pharmacy manager there and they want 5 years commitment from me. I have no business background and am lost with some of these terms.
This is the deal in a nutshell...
- we currently take $137,000 in management fees annually but because of cash flow, we leave all the money in the company
- you would be entitled to 10% and it would go into your retained earnings.
- no guarantees but the loan is paid off in 2019 so we should be at a more positive cash flow and look to pay out a portion of management fees on an annual basis
- you would be responsible for the lawyer and accounting fees on the purchase (we have taken care of the fees up till now)
Finance
We have asked our accountant to put together a fair evaluation for the current business. Here are some of the points.
EBIDA Value $1,377,260
Less Related party loans -$575,742 Retained Earnings
Less Bank loans -$532,010
Add NBV (net book value $107,205 Assets (inventory)
$376,713
10 percent $37,671
finance $57,574
Total $95,246
EBIDA was normalized at $275,452
EBIDA Value is 5 times multiple makes it worth $1,377,260. We have seen 6 times earnings for a similar location in Ontario however we wanted to come up with a fair and affordable valuation for you.
Therefore the purchase price is $95,246 (10% share price plus 10% retained earnings)
We will finance whatever portion you want at a 5% annual interest rate (same as our current loan).The loan will be open ended so it can be paid off at anytime.
I was able to negotiate to buy 15% of the company now and an additional 5% after the 5 years.
I make 156k/year + 5.5k bonus and live in Ontario.
My assets
67k in RRSP
40k in student LOC (prime plus 0.5%)
He also offered my to become the manager of the store after 5 years... (come every 3 months for a few days) 30-40k/year
Would I be able to "RE" after the 5 year commitment? Is there anything I am missing or should know before i make this commitment? I am just overwhelmed with this offer and there is a lot I don't know about businesses so I want to make sure I am not making a mistake.