Selling your business to an employee may be your best bet!

by Dione Mauric 1st of October, 2022

Selling your business to an employee may be your best bet!

Under the right conditions, selling your business to an employee can result in a quicker sale and a smoother transition.

In case you haven't noticed, there is a large volume of available businesses in today's market. So selling your business to a trusted employee or group of employees is becoming an attractive option for sellers.

There are many benefits of selling your business to an employee.

Business Continuity

A trusted employee is the person most likely to maintain the existing company culture and operate the company in a manner that is consistent with your values, and continue to employ team members who have come to feel like an extended family in most cases. Existing employees will most likely have a solid understanding of the business and the ways to mitigate any risks associated with running the business. They will also most likely be confident in their ability to run the business has already played an important role.

Less Hassle

Typically when a business is sold the owners spend a lot of their time selling prospective buyers the virtues of their company. Since employees are already familiar with your business, you won't have to invest as much time and energy.

Smoother Transition

When selling to an employee, the company staff, customers and suppliers may already know the new owner! Selling to an employee or multiple employees also allows you to make a clean break with the business rather than staying onboard for a period of time after the sale to provide extensive training and support.

It's not all smooth sailing! Selling to an employee has some potential challenges.

It's not uncommon for employee-based transactions to be at a lower sale price than could be achieved if you advertised the business on the open market.

Employees, often lack the assets and capital to purchase the business outright. This, therefore, means that sellers have to play an active role in helping employees fund or assist finance the transfer of ownership. There are other options such as an Employee Stock Ownership Plan.

If you get it wrong, or your deal goes pearshaped you run the risk of losing one of your most valuable employees!

So, is selling to an employee the right move for you?

Selling your business to an employee or group of employees provides you with another option for selling in today's crowded business sales marketplace.

Tags: selling acquisition small business entrepreneurs