Our engagements are mostly with business owners who want to design and implement a plan for their eventual transition/exit from the business. However, on occasion, we are contacted not by the business owner, but by an inside employee who has questions about potential ownership, or their future in a closely-held business. Insiders typically include key employees, a child of the business owner, or a co-owner.
These insiders have questions such as...
- "The owner has approached me about buying this business...how do I make a good decision?"
- "I would like to own this business eventually, or at least part of it...how do I approach the owner and have that conversation? What should I do if they are not willing to include me as an equity partner?"
- "I have no idea what the owner's plan for succession is, and I'm concerned how it would impact my future...how do I think through that issue?"
- "I have worked for a family business as a non-family employee...and I want to be an owner of the business...what do I need to think through?"
These questions and others like them are important, as buying or investing in a business is a huge decision. If a strategic or financial buyer were to express interest in purchasing a particular business, they would insist on a due diligence process for review of financial statements, operations, management team, legal contracts, etc. They need to consider the risk of purchasing the business, and its future growth potential.
Insider buyers need to conduct their own due diligence to determine if the business is indeed a worthwhile investment. They also need to give serious and thoughtful consideration to what it means to own a business, whether or not they have the temperament for owning the risk, and whether or not the purchase would align with their personal family, financial, values-based, and legacy goals.
Regarding the issues of not knowing what the succession plan of a sole owner is, and your future ownership potential working in a closely-held family business, you will at some point need to discuss these issues with the owner or owners. And, although all situations have differing dynamics that impact the timing of such conversations, typically it is helpful to all parties to have these conversations sooner rather than later.
If you're being presented with the opportunity to purchase the business you work in and need help thinking through it contact us.