How to Sell a Small Business – Sell to an employee? Banker Question – David C Barnett

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so when you decide to sell your small business does it make sense to try to sell it to one of your longtime employees a couple of weeks ago I was down in Dartmouth Nova Scotia talking with all of the commercial loan officers from the credit unions in Atlantic Canada at about 50 or 60 people in the room they had invited me down to do a discussion about small business valuation and one of the questions that came up at the end of the conversation was about succession planning and the loan officer asked me he said if you have a small business that has a longtime employee does it make sense to sell the business to the employee is that a good buyer and because you know these these loan officers see these kinds of deals coming to them all the time most business owners of course don’t want to use a business broker because they don’t want to pay a commission so they’re going to try to sell the business to someone who they can find themselves in order to try to do a deal themselves as I’ve said in many videos before eighty percent of small businesses are sold privately so I was asked to comment on my experience and and there’s a lot written about succession planning and about selling businesses to employees and what makes a huge difference between most small businesses and slightly bigger businesses what you might call a mid-market business is the level of structure and organization in the business so a slightly bigger business may have a clearly defined organizational chart with roles and responsibilities for all the different positions in the company and in that kind of organization you might have managers who actually are responsible for certain things they create a business plan they have to execute that plan make decisions about their team make decisions about their resources that is a real manager and that type of person could potentially make a good business buyer they can transfer those skills intolerance or inertia in most small businesses however you have one owner who usually controls everything and what sometimes happens in these businesses is they get these employees who are really great at getting tasks done and the owners will delegate tasks to the employees but they never really delegate any responsibilities to them okay and so after a while you know if you have this person with you for like 10 or 15 years they sometimes get the title of manager so they might become the customer service manager or the showroom manager or the warehouse manager or what have you but they don’t actually have responsibilities they have a set of tasks and all the true decision-making power in the business still resides within the mind of the owner now I’ve been involved in two different transitions where owners have tried to sell their businesses to these types of managers okay and in both cases the new owners ended up failing after about two years because they didn’t actually have all of the characteristics and strengths that you need to find in an entrepreneur so what kind of things you need to find an entrepreneur they need to be able to make decisions have responsibilities and you know be able to manage the stress of the role of being the owner but most importantly an entrepreneur is someone with ambition they want to achieve something now they’ve those goals could be monetary or they could want to have make a change in the world you know people you know who found new churches for example it can be very entrepreneurial or not you know they don’t have a goal maybe with respect to money but they have this ambition that drives them to a certain task to achieve something and so when it comes to these small businesses when you’re trying to find your own buyer and you want someone who’s sort of within the full to already understands the business what I actually suggest to people is that they go and look for past employees who worked there know the business and ended up quitting because they were ambitious and wanted to make more of themselves right because that’s the key trait that’s going to give them success as an entrepreneur wanting to go out and achieve more so if you’re one of these business owners and you say you know what I want to sell the Who am I going to sell it to it might be worthwhile thinking about some of the people who have come and gone and what kind of ambitions or outlooks they had in life and what they were trying to achieve because one of those people may have moved on to a role where maybe they have a little bit more money and maybe they’re dissatisfied with what they’re doing and they’re looking for the next challenge that next challenge could be owning your business I hope you enjoyed this video please remember if you like the content of my videos give them a like or a share it’s the only way the systems that manage search engines have of knowing that the content of the video is actually good as well you should join my mailing list and if you own a small business and you think you might want to sell it you really should visit my website how to sell my own business com where I give you information about how I help people sell their own business and you can download a free copy of my special report 12 things to do before you consider selling your business thanks and we’ll see you next time you made it to the end of the video that’s great why not come over to my blog site invest local book calm where you can see all of my latest posts and videos you can also take the time to watch my welcome video see what I’m all about and if you wish sign up for my email list i only send out one email each week you get to choose which topics you’re interested in so that you only get information that you want to learn about and it’s easy to unsubscribe anytime click my free resources link and have access to all of my free ebooks audiobooks and other PDF downloads thanks and we’ll see you next time