A listener recently wrote in with a situation I see more often than most business owners expect. He built a regional medical staffing company doing around $20 million in annual revenue, brought on a minority partner three years ago when he was burning out, and it worked. But now their visions have split. He wants a steady path to a sale on his terms. His partner wants to scale aggressively and bring in outside capital. The operating agreement has a buyout clause, but the valuation methodology is vague.
His question: what are his realistic options for buying out the partner without destroying the business or the relationship?
The Conversation You Need to Have Before Anything Else
Before you talk to an attorney, before you commission a valuation, have a direct conversation with your partner. I know that sounds obvious, but a lot of business owners skip it because the relationship already feels strained. That is exactly backwards. Going straight to legal mechanisms without first attempting honest dialogue will almost certainly make everything worse.
The goal of that conversation is not to win. It is to find out whether there is any version of the next five years that works for both of you. Maybe you can grow without taking on outside capital. Maybe a modest raise from an outside investor is tolerable if it still preserves your exit timeline. You will not know until you actually sit down and ask.
If those conversations have already happened and you are genuinely at an impasse, then you move to the next step. But do it in that order.
Why a Hostile Approach Will Cost You More Than the Buyout Itself
Here is the core problem with jumping straight to legal action: you and your partner are not going to agree on what the business is worth, and that disagreement is baked into your different visions.
You are running the numbers on a steady-growth company heading toward a clean sale. He is pricing in an aggressive expansion scenario where the value explodes. Who puts a higher valuation on the company? He does, every time. You are not negotiating from the same picture.
If things sour quickly, he is not going to approach a valuation conversation in good faith. You will both hire attorneys, you will both bring in competing appraisers, and you will spend an enormous amount of money arguing about a number neither of you fully controls. On a business this size, a reasonable valuation might land around $18 to $20 million. His 22% stake is somewhere in the neighborhood of $4 to $5 million. That is a serious sum to fight over in litigation.
How Business Valuations Actually Get Done in a Dispute
When partners cannot agree, the standard move is to bring in an independent third-party appraiser. The operating agreement often leaves the methodology vague for a reason: no one wants to lock in a formula (say, three times EBITDA) without knowing what the business environment will look like at the time of a split. So the vagueness in your agreement is frustrating but not unusual.
The catch is that “independent” only works if both parties genuinely accept the appraiser as neutral. If one side disputes the methodology after the fact, you are back in a negotiation anyway. Before you engage an appraiser, try to get written agreement from both parties that you will accept the result.
The Buyout Structure Matters as Much as the Number
This is the piece most people overlook when they are focused on the valuation fight. Even if you land on a number, how you pay it can change the entire deal.
Paying $5 million in cash is very different from paying $3 million in cash and $2 million in structured payments tied to the company’s performance over the next five years. The second option reduces your immediate cash burden and aligns his remaining interest with yours for a period. You might also consider allowing him to retain a small equity stake with no operational control, which gets him out of day-to-day decision-making while giving him upside if you execute the sale you are planning.
There may also be a complexity in how his ownership and employment are structured. If he has an employment agreement separate from his equity agreement, those need to be addressed independently. Do not assume buying his equity automatically ends his role in the company.
One Timing Advantage Worth Recognizing
If this process does turn messy, the silver lining is that you are five years from your planned sale. That is actually a reasonable amount of runway to work through a dispute, clean it up, and present a tidy ownership structure to a future buyer.
A buyer does not want to inherit a partnership conflict. If this is still unresolved the week you go to market, it will either kill a deal or dramatically reduce what you can command. Resolving it now, even at significant cost, is better than dragging it to the finish line.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on business partnership planning and exit strategy, listen to the full podcast episode here.