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Key Idea: Pay with Sweat

When the founder of Feasel  was ready to retire, a long-time employee was ready to buy.

Key Question:

A: 

John started buying into Feasel soon after the previous owner hired him. He did not say, but our guess is that he paid less for the business than he would have had he been a stranger.

Q: What is "sweat equity?"

A: You work in a business in exchange for ownership or part ownership. There is really no typical "deal" because every owner and potential owner makes an arrangement. If you have no money and want to own a business, this is a great option. Caution: get it in writing. You could spend months, even years, working for someone and expecting to take over (as did John) and then the person sells the company out from under you.

One of our favorite entrepreneurs, Jim Schell, sold one of his businesses to two of his employees. Like John, they had demonstrated their ability to not only run the business but to grow it. Jim priced the company fairly and set it up for them to pay him out over ten years which made the payments low for the new owners. They were so motivated to get rid of debt and they were so good at running the business, they were able to pay him off in three years and today the company is three times larger than it was when Jim sold. Thinking back over the experience Jim says that if you can't buy the business in three years from cash flow it's probably not a good deal for you.

Q:  Where should I look for a business to buy?

A:  Look for an owner over 50 years old.  People get older and get tired.  They need a way out.  Turning to one's employees to buy a business is often the first step. The owner of Feasel was ready to sell when John Gregory made his observations and asked the question.  However, if you see a business you like you don't have to go to work there.  Just pitch your idea to the current owner.

Click on the question to see more answers.

Think about it

Could you sell your company to an employee? Is there an existing business you should buy? Should you buy your competitor?

Clip from: Feasel of DeLand, Florida and the Rebirth of Downtown

DeLand, Florida: Just northeast of Orlando, this town personifies the statement, "Big business homogenizes. Small business diversifies."

On the Main Street of this town they celebrate the rich variety of one-of-a kind shops owned by locals.  Just on the outskirts of town looms the big-box retailers.  How does a family-owned hardware store on Main Street survive? How can they compete?  

We do not have any simple answers. We do know that small businesses must develop a many-sided customer relation that competes in value against the volume discounters.

When we taped this episode of the show, Feasel Paint & Glass  was being slammed by by nearby discounters, both Home Depot and Lowe. And, we are sorry to report that this downtown store closed on December 9, 2008 (more).

We were fighting for the small businesses.  We still do.  Up until the store's closure, we had encouraged people to drop in on Feasel's on Main Street and buy something.  We talked with the new owner, Mike Woosley.  He's a very nice person.  He was optimistic and we all wanted to encourage their esprit de corps for their role in the continued Main Street revitalization.

This town, cited by the National Trust for Historic Preservation as a "Great American Main Street" award winner, the people of Feasel Paint & Glass are helping to paint that picture.

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Feasel Paint and Glass

John Gregory,

Business Classification:

Year Founded:

Pay with Sweat

John, tell me how you got into this business in the first place.

JOHN: Well, I started in 1956 with a year-old baby and we lived in a little one-room apartment in Daytona Beach and I worked in a grocery store. And we wanted to move back to De Land, and I found a job here at Feasel Paint & Glass. And that's how it happened.

HATTIE: That's how it happened.

JOHN: That's where we've been ever since, for 41 years.

HATTIE: So, how long did you work here before you had an opportunity to buy the business?

JOHN: Twenty years. And we just had a gentleman's agreement that when he retired that I'd have first chance at buying the business if I could figure out a way to do it, basically.

HATTIE: At that point back then when you had the gentleman's agreement, did you feel he started sharing things with you, showing you parts...

JOHN: Oh, yes. Yes. Very involved with the books and the profit structures and everything.

HATTIE: So that means you had almost 12 years to apprentice.

When it was time to buy the business, did you just go to the bank? Did you mortgage your house?

JOHN: No. We worked out a financial arrangement with Mr. Feasel.

He self-financed it for the most part. We did have to borrow a little money, put up some. But in the meantime, during that 10- or 12-year period that we'd come to an agreement, I was actually buying some stock from him just so that I would have something paid for as an asset and an equity to start out with.

HATTIE: And that was motivational...

JOHN: So that took care of part of the equity.

HATTIE: And that was motivational for you as an employee.

JOHN: Very motivational, yes.

HATTIE: Which may have been one of the reasons you hung in there for 20 years.

JOHN: Oh, yeah, that helped on the patience level, you might say to know that I had something solid. Besides his word, I knew that some part of it was goning to be paid for with that equity.

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