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Monday, February 8, 2010

Key employees are important in management buy-out

There is one huge benefit to selling your business to key employees or managers, and that is the continuity of the business. If you sell to current management or employees, this means that the people who run the business day-to-day (with the exception of you) will still be there after the sale, as will their experience, skills and customer relationships. Other than replacing you, the business will not have to hire and train new people to do most of the current work.

Just as importantly, the relationships that managers have built over the years with important customers and suppliers will be able to continue on without interruption. This continuity will go a long way to avoid that business interruption gap in which new workers have to learn their jobs, and customers and suppliers have to adjust to new people and new ways of doing things.

Of course, this kind of success depends on having the right people in place. You have to pick your successor carefully, as not everyone is capable of running a business even if they are enthusiastic and interested in buying your business. You have to be sure that they have the necessary skills and aptitudes.

Management or employee buy-outs often involve the owner selling the business and then being paid back over a number of years from the profits of the business. Given that fact, you will be relying on these employees or managers to run a profitable business so that you can be paid back as agreed. In o ther words, you will have a strong interest in the continuing financial stability of the company after you have left it.

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