Can You Run the Business From Somewhere Else?

You find a business worth buying. It is several hours away, and you do not plan to move.

The employees know the operation. Someone can manage it. You can review the numbers and visit regularly.

Then a supervisor quits, a major customer threatens to leave, or the person running the place needs an answer you do not yet know how to give.

Distance makes those moments harder. You have fewer opportunities to notice trouble early, understand what is happening on the floor and build relationships with the people whose judgment you depend on.

Buying from a distance means building an operation that can function while you are elsewhere—and paying for it.

Start with the work the owner actually does

A seller may spend each day handling decisions that never appear in a job description: settling employee disagreements, rescuing customer relationships, approving unusual orders and knowing when a supplier’s explanation does not add up.

Ask what happens when the seller stops doing that work.

An experienced employee is not automatically a replacement. They may lack the authority, skills or desire to run the business. They may also expect considerably more compensation for taking responsibility for the whole operation.

Before relying on a manager, establish what that person will do, whether they want the role and what still falls to you. Be honest about your availability, particularly if you intend to keep another job.

The business has to afford the manager

Seller’s discretionary earnings, or SDE, commonly adds back a working owner’s compensation and benefits. It reflects earnings available to a working owner, rather than cash remaining after hiring someone to replace that owner. BIZCOMPS User Guide, SDE definition

That distinction can change the acquisition.

If your plan requires a general manager, reconcile the advertised earnings with the cost of that role: salary, payroll costs, benefits and incentives. Check what is already included in expenses so you do not deduct it twice.

Then account for debt payments, working capital, necessary investment, travel and whatever income you expect to take home.

A business that supports an owner working full time may leave much less for an owner paying someone else to do that work. Have your financial adviser model the arrangement you actually intend to use, including a weaker year.

Give the team a reason to stay—and room to act

Once the operating plan depends on particular people, their continued involvement becomes part of the acquisition risk.

Discuss roles and compensation before closing. Where appropriate, have counsel document employment terms, retention payments and performance incentives, and consider whether key arrangements should be a closing condition.

A signed agreement cannot guarantee that someone stays. It can clarify what each side has agreed to and reduce reliance on assumptions.

Incentives need the same care. A bonus tied only to revenue may reward sales that produce weak margins or never turn into cash. Define the results that count, how they are measured, when payment is earned and what happens if the employee leaves.

Authority matters too. Decide who can hire, spend, resolve customer problems and approve exceptions. Set approval limits, reporting requirements and access controls. Name a backup.

A manager expected to deliver results needs enough authority to do the job. You still need reliable information and a workable way to intervene.

Equity brings another set of obligations

Offering ownership may help align a manager with the business’s future. It also creates questions about voting, distributions, vesting, departure and repurchase rights.

For an SBA-backed acquisition, discuss the proposal with counsel and the lender before promising a percentage.

Under the current SBA SOP, an individual owning 20% or more, directly or indirectly, must provide an unlimited personal guaranty. A smaller stake does not guarantee an exemption: lenders may require guaranties from other people critical to the operation. SBA SOP, Personal Guaranties

The manager may want ownership without being willing to guarantee acquisition debt. Resolve that before building your operating plan around the offer.

A retention payment or cash bonus may be worth considering, with its cost, terms and loan restrictions reviewed. Equity deserves a deliberate ownership discussion.

Tell the lender how the business will actually be managed. The SOP also restricts certain third-party management arrangements that surrender operating discretion; its meaningful-oversight provisions matter when reviewing those agreements. SBA SOP, Passive Businesses

Before you commit

Name who will run the business, what they will earn, what they can decide and who takes over if they leave. Price that plan and test it with your advisers and lender.

The farther away you are, the more consequential those answers become.

Tolbert Legal advises buyers on acquisition structure, diligence and the legal decisions from LOI through closing. Discuss an acquisition.

General information only. Not legal, tax, accounting or investment advice.