In all honesty, selling a business can be a frustrating endeavor, especially when it comes to finding the correct buyer. As highlighted in a previous post, there is nothing that will fill a former owner with more dread than the horror of discovering that they have sold their business to an incompetent person. This is why selling to an employee has become a new avenue of exploration for owners looking to sell.
An employee as a potential buyer has its pros and cons. One positive aspect to this arrangement is the dedication and faith that the employee already has in the company. They have given years of their life in the form of hard work to make sure the business was successful, and they would have a vested interest in continued success as a result, as they would not want to see their hard work go to waste. There is also the fact that the employee already has extensive knowledge of the company and would not need as prolonged of a research period during negotiations as an outside buyer would.
However, there are potential draw backs of which an owner should be aware when selling to an employee. One potential con is the fact that an employee will have to finance the purchase of the business. An employee will not have as much capital as a potential buyer who is an investor. Due to this fact, an owner will want to make the effort to ensure the contract guarantees full payment for the company. The transition between owners will also be a potential problem when selling to an employee. Unlike an outside buyer with prior experience in owning a business, an employee will be stepping into this role for the first time, and it will take time to acclimate to this new level of responsibility. If you are looking to sell and leave, this might not be the option for you.
Is selling to an employee the right decision for you? Ask a professional broker for his advice. Contact Moshe Hazout at Transworld Business Advisors today!