Who might want to buy your business?

Could employees be buyers?

Certainly. The IRS even encourages it. In my book, How to Sell Your Privately Owned Company – Baby Boomer’s Edition, I list several reasons why employee buyouts make sense:

• It will generate goodwill in the work force.
• You’ll definitely be viewed as a good guy.
• You’ll be entitled to some healthy tax benefits.

However, don’t rush out and put a FOR SALE notice on the employee bulletin
board just yet.

Because employees usually don’t have enough money to pay cash for your company, employee buyouts are subject to certain risks. The biggest of these is the deal falling through if the employees can’t agree to the purchase price or the terms. If the deal fails, you will probably encounter a strained relationship between yourself and the work force. Some employees may leave. Others won’t trust you. If you end up selling to an outsider, many employees will treat the new owner poorly, because they may be convinced that the employees should be the “real” owners.

Employees will also want you to sell the company at a reduced price. They may also request other concessions, and more time to come up with the funds. They will literally “know your business,” because all aspects concerning your financial profile will be available during negotiations.

Even the most loyal employees can become greedy, envious, or angry. If the deal is successful but the business is not, the employees will blame you – and in the worst-case scenario, take you to court for a fraudulent conveyance action.

There are other potential buyers, of course.

Other potential buyers include:
• Customers
• Suppliers
• Competitors
• Individual Investors
• Larger Diversified Companies
• Private Equity Groups
• Industry Consolidators

Each has advantages, disadvantages and limitations. Learn about them and more in How to Sell Your Privately Owned Company – Baby Boomer’s Edition, by Eric R. Voth.

Copyright © MMIX by ERV Productions Inc. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without prior written permission of the publisher.

Eric R. Voth has been a successful business owner and seller since the 1970s. Among other enterprises, he is currently owner of ERV Productions Inc., and author of How to Sell Your Privately Owned Company.


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