I had a customer who decided to sell his business a few years ago. He had been grooming some of his key employees to take the reins, but when the time came to make a move, they froze. They had no idea what to do and hadn’t spent any time figuring it out. So, my client did what any business owner would do and sought other options. He sold his company for a great price and his key employees became the key employees of the new owner. They were very upset that the owner didn’t pursue them more in an effort to sell the business to them.
Entrepreneurs don’t often need to be coerced and courted to start a new business. They develop an idea and a plan, and then most charge head-first into the fray. Entrepreneurs possess something inside them that creates this urgency to do their own thing, often multiple times over different business entities; sometimes, they sell and do it all over again. Entrepreneurs are sometimes the worst employees, right? I mean, I say all the time that I am probably unemployable because I’ve worked for myself for so long.
When a customer begins talking about selling her business, it’s logical to look internally at a key employee as a potential buyer. Why is that?
• You have a working knowledge of the key employee. You know his strengths and weaknesses.
• You have a certain level of faith that he can do the job. He’s a key employee for a reason, right?
• You don’t have to look outside and speak to strangers about running the company you worked so hard to build. I think this is a HUGE factor.
Key employees occupy a unique position in companies. They could behave as a “phantom owner” without actually being one. Having been a key employee for my first employer, I can relate to these characteristics:
• The clients of the company could regard the key employee just as strongly as they do the owner;
• The staff could depend on the key employee even more than they do the owner for guidance and input;
• The key employee could make nearly as much W-2 compensation as the owner due to a commission structure or bonus system.
Not one of those factors turns a key employee into an owner, however. As business owners, we all know the financial risks, the headaches, the gut-wrenching uncertainty coupled with the roller-coaster highs, and the never-ending itch to keep doing something new. Not all key employees are capable of making the transformation into entrepreneurship.
Are you considering selling your business and wondering who your buyer is? It may be worth considering that key employee; it also be worth looking outside your company for a buyer. Let us walk through those options with you in our Wind-Down Consulting engagement.