Why More Employees are Buying Small Businesses from Retiring Owners

As retiring baby boomers look to sell the small businesses they have run for years, top employees are often becoming the boss.

Read the full article at: www.foxbusiness.com

The sale of small businesses has surged in recent years. Small business transactions are now up 60 percent since 2012, according to the BizBuySell Insight Report. Much of these sales can be attributed to baby boomers that are ready to retire. Revenue and cash flow are rising, and retiring baby boomers are able to ask more and receive more for their businesses.

And, with retiring baby boomers looking to sell the business that they’ve run for years, top employees often seem the most logical choice. These are usually employees who have been with the company for years, such as the lead foreman, general manager, or chief operating officer often become the new owners.

Selling companies to experienced employees makes sense. Compared to an outside buyer, top employees have already demonstrated their understanding and ability to work the business. This gives retirees confidence and reassurance that their business will continue to thrive and grow.

Selling to employees can also make a transaction easier than with an outside buyer. Employees are already familiar with the ins and outs of the business – they don’t need to do as much due diligence before closing the deal. A thorough due diligence process can included everything from reviewing the company’s financials, to evaluating its equipment, inventory and tangible assets, to its leases, employee contracts and other documents.

Moreover, obtaining financing is usually easier for employee buyers. Employees who’ve been with the company at least five years are more likely to win the confidence of lenders. Long term employees,  who have guided the company both during and after the recession, demonstrate to lenders that they understand how to keep the company running during challenging economic times.

For baby boomer retirees, selling their business to a top employee is beneficial in many ways. Not only is it an easier, faster transaction, but they have the peace of mind in knowing their business is in good hands.