Family Biz: 3 Things to Include in Your Buy-Sell Agreement - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

Julie Gordon White advises families to draft a buy-sell agreement, which will help them decide how to break up a company in the future.

Running a business is difficult enough without family power struggles and generational differences. Inevitably a parent will die, siblings might want out of the business, or spouses could get divorced, causing the remaining family/owners to bicker over who gets what piece of the family business pie. “No business is worth losing your family over so take the time to discuss all buy, sell, and partnership parameters before they elevate to issues and the most important relationships in your life are lost,” says Julie Gordon White, owner of BlueKey Business Brokerage M&A, a firm specializing in the sale of mid-sized companies with revenues up to $20 million.

Also known as a buyout agreement, a business prenup or a business will, a buy-sell arrangement consists of legally binding clauses made by co-owners to decide how the business will be broken up, who can buy a departing partner’s shares, how the price of the shares will be calculated, and what circumstances (i.e. death, divorce, or other life-changing scenarios) will trigger the agreement.  This week on Family Biz, Gordon White suggests three things  that your family should do while drafting a buy-sell agreement to avoid any future squabbles.

1) Agree upon a valuation method. The value of your business will fluctuate, so having a clearly defined and documented valuation method will alleviate future disputes at the time of sale. “One partner may think the business should be valued on a multiple of 3 (usually the buyer) while the other thinks a fair multiple is 5 (probably the seller), creating a huge discrepancy in value,” says Gordon White.  You can agree to terms up front or simply agree that you will hire a mutually acceptable certified business appraiser.

2) Determine how the sale will be financed. Bank financing may or may not be available and alternative sources should be agreed upon and documented in the Agreement. Cash isn’t the only consideration to be exchanged during a sale, says Gordon White.  A transfer of debt, a line of credit against receivables, and seller financing are only of few of the many ways to finance a transaction.

3) Hire professionals. Make sure that your business appraiser or valuator is an experienced transaction accountant who clearly understands the tax consequences of a change of ownership because tax mitigation can be an integral part of crafting the Agreement. “It’s not how much you get, its how much you [get to] keep, so know how much Uncle Sam is going to take before you make any final decisions,” says Gordon White.

For more information about buy-sell agreements visit:

Julie Gordon White’s Blog: ThePinkBizBroker

The Institute of Business Appraisers

The American Society of Appraisers

Top Strategies on Buy-Sell Agreements for Entrepreneurs

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.