How to buy into a business is the question an associate, a manager or an outsider asks when the owner will sell a share but not the whole. The arithmetic is the same as a full purchase scaled to the share, with two differences: the buyer is funding a minority position a bank is warier of, and the buyer's return is a share of profit rather than the whole of it. This page works buying into a business with the free calculator on this site, treating the share as the price.
Price the share, not the business
If a whole business would change hands at $450,000, a 30% share is $135,000 before any discount for being a minority. Enter that figure as the price in the calculator. On a worked stack of 60% bank and 20% seller note the buyer's cash on the price is $27,000, and the seller here is the owner, who often carries more of a buy-in than a stranger would.
Fund it and count the payment
A $81,000 bank note at 10.5% over 10 years costs $1,092.97 a month and a $27,000 owner note at 6% over 5 years costs $522.00, so the buy-in costs $19,379.64 a year in payments. That is paid from the buyer's share of the profit and their pay, not from the whole business, which is the test that follows.
What the share pays you
A 30% share of $180,000 of seller's discretionary earnings is $54,000, and the buyer's own pay is usually a separate salary agreed with the partners. If the share's profit after that pay does not cover $19,379.64 with room to spare, the buyer is paying to work there. The partnership agreement, the allocation and the exit terms belong with the target in the register.
Questions people ask about how to buy into a business
Will a bank lend on a minority share?
Some will, with the other partners' consent and often a personal guarantee. Many buy-ins are funded mostly by the owner's note, which the sheet handles as the seller note line.
What discount applies to a minority share?
That is a valuation question and this site does not answer it. It shows what the price you agree costs and returns.
What is different in the paperwork?
The partnership or shareholder agreement replaces much of the purchase agreement: voting, drawings, buy-sell terms and what happens if someone leaves.