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Owner selling business still retains some control

Charles Evans is selling his North suburban strategic management consulting firm to an inside management team, but the deal gives Evans significant "butt-in" control during the first year and less over the next four to "raise my hand and say, 'This is wrong. I'm taking the company back,'" he says.

Charles Evans is not the owner's real name, but the winding path this entrepreneur has taken to sell his successful consulting business is one many business owners will recognize.

The deal is very 2010.

The business we'll call Evans' Strategic Management has a high reputation, an enviable stable of mid-market clients and a highly regarded staff of consultants. Now, says Evans, ESM also has owners who can build much-needed company infrastructure.

"I focused on building revenue," Evans says of his stewardship since founding the company in the late 1980s. The new leadership, two employees who have been with ESM for five and six years and who will share ownership on a 55 percent to 45 percent basis, "has a better ability to build infrastructure."

Evans actually decided to sell six years ago.

"People were coming to me, wanting to buy the company," he says.

The proposed deals, however, were "minimal money upfront. No one would put the selling price into escrow," which Evans wanted as assurance that he would receive the full buyout price. One reason: Talks with various advisers led to concerns, he said, that "two years down the road, a buyer would find a reason to sue and stop making payments."

Evans eschewed using business brokers primarily because required confidentiality agreements meant he couldn't tell staff what was happening. "But they would find out," Evans says. "Employees have come here because of me."

The deal is tough, drawn up by Evans' attorney to give Evans every protection. The two buyers "don't have the resources" for a direct buyout, Evans explains. Instead, the purchase is being financed out of company revenues as a five-year installment sale with a balloon payment. Evans will continue to draw his salary, with annual installment payments coming from EMS profits.

Any profits left after the annual payment will be split equally by Evans and the new owners.

Evans will remain active for a year with, according to plan, his role moving from "buttinski to call me when you need me" in 2011.

• Questions, comments to Jim Kendall, JKendall@121Marketing Resources.com

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