The sale of any business is complicated, and selling a small, personal-service business like a farrier practice that is built around developing successful client relationships is even more difficult.

A business sale is composed of two parties exchanging assets that they agree are of similar value. In this case, this usually would mean paying all cash or coming up with some type of a combination of a cash payment plus an earn-out arrangement when purchasing a farrier business.

Short-Term Contracts

A successful farrier once told me, “You get hired when the phone rings, and fired when they write the check,” due to the personal nature of footcare work. As a result, it’s extremely difficult to place a value on a client list since a farrier basically enters into the equivalent of a short-term contract each time he works on a horse.

If your business is organized as an S corporation (S corp) or a limited liability corporation (LLC), things can become even more complicated with the potential sale of your business. If there are multiple owners, such as with a multi-farrier operation, the mechanics of undergoing an ownership change may be outlined in the articles of incorporation and prove to be even more complicated than the sale of a business owned by you and your spouse.

Once the actual sale is completed, then the S corp or LLC is likely terminated and the proceeds are distributed to the selling shareholders. Nothing is simple about it.

Dealing With An Earn-Out Sale

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