One of our current clients reached out to us for exactly this reason. He had purchased the business that he was now selling years ago, and he wanted to offer his employees the same opportunity he had. Our client ran into what seemed like a major roadblock, though – none of his employees had the financial wherewithal to purchase the company. With our firm’s help, a key employee is now able to finance the deal through the use of leverage.
With the financing piece figured out, our client could focus on choosing the right person to take over the company rather than the person with the most capital. Selling a business to key employees instead of making the decision based on one’s personal financial situation is important. The best employee to take over any company is the person with the vision and dedication to take it to the next level, which may or may not be the person with the biggest wallet.
3 Benefits of Selling Your Business to Employees
- Maintain a bright future for your company – an employee who is invested in the company and cares about his or her colleagues will maintain your values and continue to invest in your company culture and business growth. What a great message that this sends to the other employees that you chose to allow the company to remain in friendly hands!
- Quicker sale – your employee will already have an intimate knowledge of the company, so there is less hassle in the searching and pitching that is typically part of selling your business.
- Easier transition – because your staff, partners, vendors and customers will already be familiar with the new owner when you sell to an employee, your exit could be a lot smoother than it would be if you sold to an outside buyer.
Why Business Owners Don’t Always Sell To Employees
There are two main reasons why selling a business to key employees may not always seem like the most attractive option initially. First, many business owners’ perception is that they won’t make as much money selling to an employee compared to what the company might fetch on the open market. However, this isn’t always the case – it all depends on how the sale and purchase are financed.
The second reason is the same one faced by our client – business owners may feel that none of their employees have the financial ability to purchase the company. In the business owner’s mind, this translates to the seller (or current owner) having to help fund the business purchase themselves. Again, with the right financing this doesn’t have to be the case.
If you want to know exactly how to sell your company to your employees, contact our team of financial advisors today.