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I have a 50% stake in a retail online start-up that has been in business more than a year. I got accepted to business school and start in August 2013. My partner claims that I will not be motivated to run the company and wont have time as well. I disagree but either way I think is best for us to part ways. Im in charge of the day to day operations and I built all the relationships with our suppliers. He takes care of the graphic design and accounting work. I wanted to know how I can determine a fair evaluation of what I should get for my 50%. Im also willing to help him with the transition and sign a non-compete.

Thanks for all your feedback

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There are complex models to calculate business value but hard to apply to small cases. For small business, the simple method is to multiply years to annual profit.

Company value = Years X Annual profit

For annual profit, it should be your annual net profit minus the market value of you two's salary, because you and the partner don't get salary from the company.

There are some factors to consider when deciding how many years here. Profitability - The more money you can earn, the better the business. Stability - How stable is your methods to generate revenue? Growth rate - How likely it is to grow?

Of course there are more. But let's make things simplified. Please note the factors are very subjective, they are only a thinking framework. You two need to get consensus on the factors.

In most cases the range will be from one year to five years according to the factors. If no special competitive advantage, it may end with one or two years, or less.

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You state that your formulate depends on revenue, but then you define revenue as a type of profit. Would be much more helpful if you were more precise in your terminology. – Kekito Dec 20 '12 at 13:54
@Kekito, yes you are right. I should use "profit" in formula, which is what I meant actually. Thanks for reminder. – Billy Chan Dec 20 '12 at 14:11

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