Posted on Mar 11, 2019

Worker Cooperatives of Long Island

When you think about selling your business, you probably want to sell it to a third-party. Maybe you can get a better price. Maybe you can get all the money up-front. That's the ideal world. Reality is that only one in five who try to sell their business actually succeed. Therefore, selling to a management team as a Plan B becomes the most common exit plan. The trouble is that they will have to finance almost all of the purchase price. A bank will only lend so much, will want personal guarantees and first dibs on the assets should something go wrong. The gap will have to be filled by seller financing. You know the buyers. You know what they are capable of and what they are not capable of and you do have the ability to step in should something go wrong, but you would basically be working for the bank for free. Your own claims to assets will only be met after the bank's have been met. There are two things you can do to make it better. First, finance the whole sale yourself if you can. Then you can easily take control should something go wrong and you have first dibs on any assets. Second, make all the employees buy the business, not just the management team. As owners, they all have an interest in the survival of the business and your money will be safer.