Try before you buy?

searcher profile

March 25, 2025

by a searcher from Yeshiva University in Los Angeles, CA, USA

What are your thoughts about working in the business for a year or so before buying. I am working on a deal that has a lot of owner involvement and he would prefer training and seeing how things go for the first year before making a sale. Anyone here try that?

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commentor profile
Reply by a searcher
from INSEAD in München, Deutschland
I think it is an interesting idea and especially helpful for the seller. I considered it myself, but frankly only for a few days, maximum one or two months depending on the business.. How do you plan to handle compensation over a one year time frame.?I assume you won't work for free nor get your market salary.
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Reply by a searcher
in Winston-Salem, NC, USA
For some deals it might be the only way to get what both the sellers and buyers want. I am looking at a manufacturing deal currently that is unfinanceable with SBA lending due to poor performance in the past 2 years. With my expertise in the specific industry I'm really confident I could turn it around.

The problem is that because it is losing money it is effectively only valued as the liquidation price of the assets (which is less money than the seller wants) and there is no way for a bank to finance this with enough working capital to actually run and grow the business (there are heavy inventory costs in this business).

My options are A) Raise a ton of money from investors to buy this (downside is give up equity and also there is some risk if I cannot turn it around) or B) Run the business for 1-3 years or until it is bank financeable and then complete an acquisition (eliminates the risk if the turnaround isn't successful, and gives the seller a better sell price).

Only way to do this is for an ironclad agreement and price agreed upon ahead of time, in writing, by contract.
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