Friday, January 25, 2019

Would Your Employees Want to Buy Your Business?

Preparing Your Business for Sale
Well, of course they would, you might think and that is understandable, but not necessarily true. You may consider yourself to be pretty objective, but chances are that you are far more guided by emotion than you think. The same goes for your employees, but unless you have cultivated a uniquely cooperative corporate culture, their concerns are different from yours because their perspective is different. Chances are that they will be far more emotionally detached from the business than you are. They may consider it just a job that puts food on the table. Some might even dread going to work at your place every day.

Lots of surveys have attempted to uncover what employees are looking for in a job and pay is not always at the top of the list. Faced with the possibility of becoming owners, chances are that the question of how it will impact them financially suddenly moves up that list. They are going to want to know if they will continue to get a paycheck.

There are industries where employees are well paid, but many are not and most of the purchase price will have to be financed either by you or someone else. No matter who finances the sale, they are going to want to know that they will get their money back.

Therefore, the question for you shifts from if they want to buy it to can they buy it. They may not value the benefits of owning their own business as much as they value their paycheck and it may be more attractive for them to go work for someone else. If it can't pay their bill, it has no value for them. Likewise, if the bank can't get its money back, they will not finance the sale.

So what do you do about it? Basically, you would have to do the same things you would have to do to sell it to a third-party. You have to make sure it makes financial sense for them and you do that by installing value drivers and we are going to talk more about them in future posts. All of these things take time. You simply cannot start early enough. Do it today.

Business Exit Planning: Options, Value Enhancement, and Transaction Management for Business Owners

The truth is that most business owners are woefully unprepared for their exit. Most fail. Too many end up closing leaving the owners with very little to show for a lifetime of hard work they thought would finance their retirement. Even if your buyers are your employees, they, like any other buyer, are going to want to buy something that has value. This book will teach you how to sell a valuable business.

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