When thinking about selling a business in BC, most persons think right away about selling it to an outside party. This requires putting the company on the Business for sale BC market and hiring professional help to conduct the purchase. When selling this way it typically includes a lot of waiting and discussions in order to decide who the best person is to undertake the business. If there are no offers for the business then you will have to assess the reason why and possibly change your offer or think of another option for selling the business.
Because of the difficulty that business selling in BC entails, it is becoming very popular for sellers to consider someone on the inside to sell the business to. There are two methods that sellers usually turn to in order to have this done. You can sell the assets to the management team or you can sell the company shares to employees at a reduced cost. There are advantages that will come with each of these methods and they also come with their own setbacks. Your decision therefore would depend on the type of business and what you want to get from the sale.
Selling Shares to Employees
Selling shares to your employees is known as employee stock ownership plan (ESOP). This method is a long term option as employees get to buy stocks overtime based on how long they work with the business. Many business owners prefer this option because it is not an abrupt solution so it gives them time to slowly remove themselves and monitor the transition phase effectively. However, some owners like to wrap up the sale quickly if they have employees who have the capital to buy the stocks on short notice. They can also help the employees who do not have the funds to get a loan in order to make the purchase.
Selling Assets to Managers
When the managers buy all the company’s assets this is known as the management buyout. This differs from the employee stock ownership option being that there are fewer benefits offered to the managers. They usually need to get a loan in order to finance the acquisition and they pay the full price for the business. The edge that this option has over the ESOP is that it leads to less regulatory pressure on the buyer as this allows the business owner to privatize the company so that the sale is a lot simpler.
Time Management is key
Selling your BC Company to your employees is all about time management. Selling to an employee can be an easier process with less stress and uncertainty. However, it will take about 3 years to get this done, especially if you are using the ESOP option. So start doing some early planning so that you can introduce the idea to your employees and they can get to think about it and get into the frame of mind of buying the business. You need to give them enough time before you start the transferring process as surely they might not come to a decision right away. You need to also give yourself time to assess how suitable your employees are for ownership.