7 REASONS WHY BUSINESS ONWERS LIKE TO SELL TO THEIR EMPLOYEES

Many advisors to business owners say that a sale to employees is a great option for companies that don’t reach the "sale to third party" threshold, as if it's a last resort. Typically, this threshold is defined as the point at which a business can be sold for (mostly) cash. While this may be true sometimes, it is not the reason that most business owners want to sell to key employees.

Over the years, we’ve found that owners choose to transfer their companies to key employees for one or more of these 7 reasons:

1.    Business owners believe that they owe their employees something. Since their key employees helped create the company and certainly have contributed to its success, these employees "deserve" the opportunity to purchase the business.

2.    A variation of #1 is owners who want to provide their key employees the same opportunity they had to become financially successful.

3.    Other owners choose this transfer because they have already promised their employees that they would sell to them. They feel committed to following through on this promise.

4.    Some owners believe that the only way to continue their legacies and the company culture is to transfer to their key employees.  This is often true.

5.    Some owners are convinced (sometimes accurately) that their companies are only valuable to the key employees who work there. Historically, businesses worth less than $2 million are not attractive to outside third party buyers

6.    Maximizing their own income motivates some owners. They may believe that key employees will pay more for their companies than any other type of buyer. (This requires careful exit planning well in advance).

7.    Lastly, some owners use the gradual sale of ownership interest to key employees as a way to motivate those employees to stay with the company.

There are several ways to go about selling a company to employees. Not every method works for each situation. Pros and cons must be identified and evaluated.

No exit plan or transition plan will work for everyone. We take into account your values, your motivations, your family, key employees, timing, and overall financial needs. From there we can craft an exit path that truly satisfies you. 

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