Where can I go for this kind of advice?

[TheWeeMacGregors]

I'm at a bit of a crossroads in my life. Have an opportunity to negotiate myself an equity share at work but have no idea how to go about this and am going to seriously do myself down if I go into this unprepared. Is there such a thing as a business coach you can pay for - but somebody who can give me this kind of advice? Any ideas?

Google 'business coach; it's a thing.

I did that but I'm just not getting anything which is someone who can advise me specifically on this type of situation. I don't need or want ongoing business coaching, I just need some help to address this one thing. All the other things look a bit bigger and wider than that...

When you say an equity share do you mean you have been offered shares or share options? If that's the case you need either a lawyer who specialises in equity incentives, or an accountant who understands the whole picture (some accountants have limited knowledge).

Happy for you to DM me if it's a general question. I work in this field, but with advisers for the actual agreements (so can recommend specialists).

There will be an underlying reason why you find the negotiation difficult. Once you have solved the underlying reason, the negotiation will be easier.

You may need a couple of sessions with a coach to find the confidence you need. A good one will be expensive but worth it. Perhaps a coaching company (rather than approaching an individual) could match you to the right person.

Coaching can be transformative!

If you also need to know share values etc, phone an accountant. I would approach a local office of BDO Stoy Hayward or Grant Thornton for this, as they have specialists in share options etc.

Thank you! I feel very naive - and yes, massively underconfident. Am a bit cagey as sat next to the person will be negotiating with so might have to write more tonight! Thank you very much for help so far - will write more of an explanation later - very grateful for advice!

A business coach will have no idea about this! The OP has to understand what's on the table, what the benefits are, what the constraints and liabilities might be, and how to get the best deal for herself. She can only do that by dealing in facts.

Olly, are you a coach?

A coach knows that it's the how of negotiating as much as the what.

You need a specialist accountant (1 hour probably) then a couple of coaching sessions.

Think about the person you are negotiating with. Are they a fact based person? Analytical? Strategic? You need to learn to sell your wants and needs according to what pushes the other persons buttons.

Okay thank you! He is at lunch - hence the update! Bottom line - we are a small, privately owned marketing agency. Woman who owns it is retiring and chose my colleague five years ago to hand it over to. My colleague asked me five years ago to go in with him - we make a good team, I like him, I respect him. I guess equity was the wrong word - it's percentage ownership - so that if we ever sell it and presumably for any dividends etc?

Also - he deserves more than me - he has been here double the time, he was responsible for building it up into a profitable business again. And he currently runs it financially (probably a good thing). I am pretty happy with him being recognised for that. But I bring a lot to the table.

Speak to a good accountant who will be able to explain share options and financial implications so that you know what the pitfalls are as well as the benefits.

Okay - that seems to be a bit of a consensus actually - I hadnt even thought about an accountant - but yes that seems logical. I do also agree about the business coach to up my confidence though.

Just wanted to say thank you for the advice earlier - if anybody is still around any clues what the accountant will need to know? I'm a bit chicken and egg - I don't quite know what to do first!

No, I'm not a business coach as such, I help business owners sell their businesses, either to their employees or to their management team.

So the current owner is GIVING the business away? That would be highly unusual; it would be more usual for the owner to sell to the their stake. In other words, looking at you to buy in to the business.

To arrive at a valuation the accountant will want to see historical and current accounts, and forecasts. You will also have to be clear about any outstanding liabilities that exist and what is happening with any assets (is there property? leases? change of control clauses as part of the lease? What about intellectual property - is the owner putting a value on that?)

I'm not sure you're clear as to what is actually on the table. If you are buying in, will the shareholding give you the right to be a director? Voting rights? If that's the case you have to be aware of directors' responsibilities and liabilities. You also want to know what conditions the seller might be putting on the sale and how you can exit your shareholding.

If you are buying into the business it's a lawyer you need, although an accountant will be able to get you to a point in the process.

Thanks Olly. You're absolutely right, I'm not clear what is on the table. Essentially I understood that the owner wanted us to take over and just keep paying back out of the profits (neither of us have any capital to invest). So it wouldn't technically be ours for quite a long time. But I need to come to an agreement with my colleague as to when it is ours (i.e. in 20 years time or whatever) how that is split. Does that make any sense - or does that sound implausible? I am Director in name only at the moment, but yes the plan was to give me Voting Rights alongside my colleague.

Okay - think I understand what's happening now. It's referred to as a VIMBO - vendor initiated management buyout. The owner is selling the shares and the actual sale is funded by the company, probably by vendor loans (the seller loans the company the money to buy the shares from them). The following is a very broad explanation - in real life there's lots of ifs, buts, twists and turns! This might be a phenomenal opportunity or it might be a way to extract cash and dump problems on someone else so you need to go in with your eyes open.

This deal can be done in two ways :

All the shares are transferred at the outset. For example company valued at £1m. All the shares go to the individuals, and the company has a debt of £1m. There will usually be strict penalties and high interest to reflect the "risk" the seller is facing . (ie if the company performance dips and doesn't have the cash, they won't receive their repayments). There are also likely to be restrictions and vetoes imposed while the money is outstanding (eg new mgt team can't invest, borrow, acquire, hire someone over £50k or sell without vendor's approval). If this is the scenario then you are the owner from day 1.

2, Drip down - shares transferred in tranches eg 10% of shares every year for 10 years. You won't have control of the company until more than 50% passes from the seller to the management team. This is more unusual these days (because performance may fluctuate affecting share value and also exposes seller to higher risk. On the flip side they can benefit from upturn in performance)

The seller will have a price they want for the business. You are a party to this transaction as an individual and you need your own legal representation. You will have to be comfortable the price is right, what your shareholding will be and you have to know what the "rules" are . usually found in the Share Purchase Agreement. Your shares may have voting rights, but if you only have 10%, and your colleague has 90%, you're not in a powerful position.

When you say director in name only, the question is:Are you named at Companies House. If so, then it's in more than name.

Wow - you are so helpful! This is really kind of you, surely the spirit of Mumsnet!

No, I am literally Director in name only - e.g. LinkedIn/email signature etc.... it just makes sense from a business point of view to have clients see us as joint leads. He was made Director some time ago.

That is so helpful to see the two options set out like that. I honestly don't know which one the owner and my colleague have discussed. I suppose that is my first problem that I don't know that!

And my second problem is that I don't know what I want. I suppose in my head I had seen it as a bit more balanced than 90% versus 10% but I have no idea really how to work out what is fair and what is beneficial for the company....

It is a phenomenal opportunity - definitely. This is an agency I love, it's an established business, and I have a huge amount of respect for the owner and my colleague. I know I can do good things here.

how to work out what is fair and what is beneficial for the company

No- you have to work out what is fair and beneficial for you! Seriously, at the beginning of (most!) transactions everyone is being nice and polite to each other. At some point, things will get difficult for a number of reasons : former owner doesn't like how you're running the company, you hit a rough patch in terms of trading, someone gets seriously ill. You need a robust, solid agreement that protects your interests.

I'll have to be very vague to illustrate as this could be libellous if people recognised. I was called into one business where the former owner had sold the shares to two managers. All three trusted each other implicitly and they were three good people. One manager met someone, left his wife and family (total shock!) and relocated to the other side of the country, believing he could still run the company (and take a salary and extract dividends) to the same level as before. And nothing in the original agreement said he couldn't. The other guy was not happy. It all got very very messy.

Right. Yes, I see what you are saying. Same here, three good people, all like each other, etc. But yes I see how it could go wrong.

What I don't get.... if you balance one way rather than the other - then somebody always has control, which is a problem if you disagree. If you are 50 - 50 you have deadlock if you disagree. Or am I missing something?

That's why the detail is important. The legal agreements will say what happens in that case. You will have two hats here (if I'm getting the story right) - the shareholder and the director.

In simple terms shareholders have control of the company, the directors have legal responsibility for running the company. You might have two shareholders, but could appoint other directors. In fact, it would be very usual for the former owner to remain as a non Executive director while the company owes them money. It's usual for the vendor to either have that right, or appoint a director in their place. That's why the legal agreements need to be clear and water tight.

That's really clear. Can't say thank you enough - feel as though I have taken up more than enough of your time. Might signpost future posts as VIMBO advice or something in case you feel like helping me out again. Am off to learn and have some discussions and get some advice. Thank you. Thank you.