Should you Sell Your Business to your Employee? Viewer Question - David C Barnett

Two weeks ago I was in Dartmouth, NS talking with the commercial loan officers of Atlantic Canada’s credit unions about business valuation.

At the end, I got a question from the floor about succession planning.  ‘Does it make sense to sell a business to an employee?,’ asked one of the attendees.

I know you’re going to hate this but, it depends.  Watch the full story in this video: https://youtu.be/ODZF3gTeETc

In well organized, maybe larger businesses, managers have well defined roles and responsibilities.  They manage their own business plan and make decisions about resources and employees.  It’s up to them to perform and they’re accountable for what happens.

This type of person may be able to transition into entrepreneurship.

In many smaller businesses which are ‘technician run,’ to borrow the terminology from Michael Gerber’s E-Myth book, it is not so easy.

These small business operators keep most of the strategic procedures and policies in their heads and ALL the responsibility.  Sometimes a long-time employee who is really great at handling a long list of complex TASKS is given the title of ‘manager.’  This doesn’t actually make them a manager.

I’ve been involved in two such successions and both buyers failed after about two years.  They were never the right candidate to weather the stress involved in business ownership. 

Most importantly, however, they didn’t have the drive and ambition.  If they did, why were they still working in someone else’s shadow for all those years?

Most business owners want to try to find a buyer on their own.  80% of small businesses are sold in the private market and mostly because owners don’t want to pay any type of commission to a broker.

So who do you look for when you need to find a buyer?

Try the ones who got away.  The good employees that you hated to lose because they knew the business and were really capable.  The ones who left because they wanted more.  These are the people with ambition.

If you want to learn more about how I help business owners sell their own business and avoid paying a commission, check out www.HowToSellMyOwnBusiness.com

There are plenty of FREE resources there to help you begin planning your transition out of your business.

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Thanks and I’ll see you next time.