The problem in a nutshell: I am the sole owner of a S-corp consulting practice with one very large, very happy client. My company has grown a lot and, to handle the workload better, I've brought on some subcontractors who essentially do the same thing I do. Now I'd like to "sell" the book of business to one of my subcontractors, but I have no idea what sort of financial arrangement makes sense. At present, I handle all the billing, manage the client relationships, and so forth. This is a very high margin business (~90% profit) because what we have to sell is our time and expertise. For work done by my subcontractors, I keep 15% and pay them the remaining 85% of the revenue they generate. Everyone is happy with this arrangement and it could conceivably continue like this far into the future.
In the next year or so, though, I'd like to retire and turn over my role to one of my subcontractors. We've agreed to this in principle, yet neither of us know what that would look like in practice, either financially or legally. And so I turn to Metafilter for ideas, suggestions, anecdotes, and anything else you can offer to help me figure out a way through this.
Other, possibly relevant, facts: The client is well aware of my desire to retire and wholeheartedly supports my passing the business on to someone they also know and trust (i.e., one of my subcontractors). The chance of losing the client to a competitor during the transition is essentially nil, especially since I won't turn it over until everything is humming along smoothly and the client is as comfortable with my subcontractor as they are with me. There is considerable trust between my subcontractor and me, but we live about 1000 miles apart. While I've developed a process that suits the client, I don't consider it to be intellectual property with a value of its own. The only value involved here is the great relationship, and promise of continued business, with the client.
In the next year or so, though, I'd like to retire and turn over my role to one of my subcontractors. We've agreed to this in principle, yet neither of us know what that would look like in practice, either financially or legally. And so I turn to Metafilter for ideas, suggestions, anecdotes, and anything else you can offer to help me figure out a way through this.
Other, possibly relevant, facts: The client is well aware of my desire to retire and wholeheartedly supports my passing the business on to someone they also know and trust (i.e., one of my subcontractors). The chance of losing the client to a competitor during the transition is essentially nil, especially since I won't turn it over until everything is humming along smoothly and the client is as comfortable with my subcontractor as they are with me. There is considerable trust between my subcontractor and me, but we live about 1000 miles apart. While I've developed a process that suits the client, I don't consider it to be intellectual property with a value of its own. The only value involved here is the great relationship, and promise of continued business, with the client.
