You're thinking about selling your company and you know that you need to find a buyer you can trust, but where do you start?
On this Golden Nugget of The ROI Online Podcast author, consultant, and business owner Josh Patrick explains to business owners who are looking to sell their company why an employee can be a great buyer and how does it work.
One of the presenter's topics was on company sales, specifically company sales to employees. Josh Patrick explains that company sales to employees are not as uncommon as it might seem at first glance, and in this Golden Nugget he provides six reasons why it can be a positive thing for you as the business owner.
"I would say probably that is the number one transfer method private business owners actually use." Josh comments.
Click the video to watch below!
One of Josh's friends, John Brown, trains advisors on how to help people lead their business by doing exit plans. And John shares that the vast majority of the plans they do are for internal transfers, not third-party sales, not families taking over the business.
A fact not everyone knows is that the internal sale to managers is pretty similar to the transfer to your children because neither of them has any money! So you have to figure out how are you going to get this business transferred, in a way to these people that they can afford to buy it and you're going to get enough where you feel it's worth your time and effort.
6 Reasons To Sell Your Company To An Employee
- The Unknown Devil: Few owners believe their employees are perfect, but they often fear the “devil” who will take over when they retire more than the one that is currently in charge. Knowing their successors gives many owners peace of mind to leave without worrying about potential problems after retirement.
- Community Presence: A small town’s business is a big part of the community. This creates an interesting dilemma when that company gets bought by another owner--the local owners want to keep their companies in their communities but they are genuinely worried about what will happen if it's not them who has ownership anymore. Recently, we watched as one company was acquired and then 500+ employees were laid off only because the purchaser wanted access to customer lists for its own purposes which means those fears may be justified depending on how well you know your buyer!
- Team Success: Owners are known to want to keep their current team successful, even if they have left the company. The success of a business usually relies heavily on its employees and owners often rely on those same people when it's time for them to retire or move onto another project that requires more attention.
- Cash flow: By reducing your involvement in running the company, you can also reduce any risks that come from not being able to retire on time. By selling a key employees at their buy-in date and immediately stepping away after it's finalized, you will have an easier retirement with more money to spend than if your business continued operating as normal for another decade or two before shutting down entirely.
- Employee Reward: Many owners want to “reward” their key employees for the years of effort they’ve put into building the business. Selling it off and letting them take over can do that, but keep in mind that while these workers may be grateful there is no way to know how this will affect future motivation since a company never exists until someone has taken ownership.
- Legacy of The Owner: The legacy we leave behind is one of our most important characteristics. We want to make sure the way that we treat clients, employees and work remains for generations after us. The people who are steeped in a company's culture often have their best success when they take over management positions within it because they already know what works with this particular organization so there won't be any trial-and-error needed while trying to establish your own personality as an owner or leader.
If you’ve been thinking about how to sell your company, these six reasons should give you some guidance. Consider the unknown devil that can come with transferring ownership for one minute and then remember all of the benefits listed above! If you want help figuring out what will make a great transition process or who might be interested in buying your company--let Josh know today!