A clean break, step by step
Start with the agreement, not the number
Most shareholder agreements already set out vesting, leaver categories, the valuation method and who has the right to buy. Reading them first turns a personal disagreement into a process question, and it tells you which inputs in the calculator are fixed and which are open to negotiation.
Choosing a valuation method
| Method | How it works | Best when |
|---|---|---|
| Last funding round | Price per share from the latest round | Recent priced round |
| Revenue or EBITDA multiple | Sector multiple applied to current numbers | Profitable or recurring revenue |
| Independent valuation | Third-party valuer report | Founders cannot agree |
| Formula in the agreement | Fixed formula set at incorporation | Agreement already defines it |
Paying for it
Few companies can pay a large buyout in cash on day one. Instalments with interest spread the cost, and a share pledge or escrow protects the departing founder until the balance is paid. Another route is a secondary sale of the stake to a new or existing investor, which brings cash in without draining the company.
When a sale is the better answer
If neither founder can fund a buyout, a sale of the whole company can be the cleanest outcome for both. Compare likely offers in the exit simulator (opens in a new tab) and see what proceeds mean after tax in the post-exit wealth modeller (opens in a new tab).
Frequently asked questions
- How do I buy out my co-founder?
- Agree a valuation method, apply it to the vested shares, adjust for any discount and leaver terms in your shareholder agreement, then agree how the price is paid. Most buyouts combine an upfront payment with instalments over two to five years.
- What happens to unvested founder shares?
- Under most vesting agreements, unvested shares return to the company or the remaining founders at nominal value or cost when a founder leaves. Some agreements accelerate vesting on a sale or a termination without cause, so check the exact wording.
- What is a good leaver and a bad leaver?
- A good leaver usually leaves through illness, death, redundancy or by agreement and receives fair value for vested shares. A bad leaver typically leaves to compete or is dismissed for cause and receives the lower of fair value and cost. Many agreements add an intermediate category.
- Should a minority discount apply?
- A minority stake in a private company is hard to sell and carries no control, so independent valuers often discount it by 10% to 30%. Many shareholder agreements remove the discount for founders, so check your agreement before negotiating.
- What happens to a departing co-founder’s shares if the company is sold later?
- If the shares were bought back, the departing founder has no further interest unless the agreement includes an anti-embarrassment clause, which pays a top-up if the company is sold within a set period at a higher value.