From Employee to Owner

You might think it would be a simple transaction when an employee is buying the business they work for. After all, the buyer and seller already know each other and both know the ins and outs of the business.

Yet even when these factors fall easily into place, structuring and financing the transaction can create major stumbling blocks. As one employee turned owner discovered, "… the previous owner and I had worked together for years. We knew each other and knew the business. He wanted to sell. I wanted to buy. We both wanted to be fair on price. It all looked easy until we started asking each other what a fair price was and what to do about financing. Then I realized we needed professional advice."

"Both sides really want to be fair, but it can be hard for the buyer and the seller to know the real market value of a business they're so close to."

The buyer turned to Travis Kellett, founder of Bridgepoint Business Brokers. "This isn't uncommon in an employee purchase," says Kellett. "Both sides really want to be fair and consider the best long-term interests of the business. But it can also be hard for the buyer and the seller to know the real market value of a business they're so close to."

"Even if you can write a cheque for the full price that may not be the best approach for the buyer or the seller."

Structure and financing can also be challenging. Kellett, whose background includes 13 years of commercial banking experience, notes that, "... even if you can write a cheque for the full price that may not be the best approach for the buyer or the seller. The way things are structured can have a big impact on things like taxes and cash flow."

"It's a lot easier to deal with a bank when they're nodding, not shaking their heads or puzzling over poorly presented financial information."

The bank needs to be onside as well. "Because I've seen a lot of business deals from the bank's side, I pretty much know what they're looking for," says Kellett. "It's a lot easier to deal with a bank when they're nodding, not shaking their heads or puzzling over poorly presented financial information."

The buyer describes Kellett's role in this transaction as, "... a conciliator or facilitator, not a negotiator. He worked with both sides to develop a business valuation, create a transaction structure that worked for everyone and lay out a financing plan that the bank was totally onside with. Thanks to Travis, it was all smoother and faster than we could possibly have done it ourselves."

"Thanks to Travis, it was all smoother and faster than we could possibly have done it ourselves."

Find out more about the ways Bridgepoint Business Brokers can help you with every aspect of selling or buying a business. Call Travis at 306-979-8750 or click to email Travis.