Would You Be Willing To Sell Your Transportation Business to an Employee?

Some transportation businesses get handed down from parent to child for generations, while others sell to outside parties. A third option is often overlooked: selling to a key employee. Even though this option might not be your first inclination, it makes good sense. A long-time employee has the kind of vested interest and organic experience that outside investors lack. While not every employee has what it takes to become a business owner, you may have one who would blossom in such a position. The right person will have the following necessary characteristics: potential to run a business, capability to keep risks low, and ability to secure needed financing.

Potential To Run a Business

Not every Employee of the Year will make a good business owner—but some could. Popularity among other employees or with customers will only go so far. Familiarity with the transportation industry and ability to perform job tasks fall short of being the only aspects of a good business owner, but they’re a good start. Successful business ownership also involves leadership and organizational skills as well as financial savvy. If you hold an employee to the same standards you would have for an outside investor, you’ll probably be in a good position to make sure you’re selling to someone likely to succeed.

Capability To Keep Risks Low

The transition period between owners is a volatile time for any business, prompting employees and customers to feel insecure and possibly jump ship. The uncertainty is often caused by too many changes right away, declining business due to the learning curve, and lack of faith in the new owner. Those issues are lessened when the new owner has been a long-time employee who already has the basics of the business down pat and has positive relationships with customers and staff. However, if the new owner has strained relationships within the company or demonstrates lack of business acumen, the familiarity will be a detriment. The risks involved in selling to an employee aren’t a one-size-fits-all scenario: They’re determined by the individual person in question.

Ability To Secure Needed Financing

Following a third-party transportation business valuation, you’ll have a pretty good idea of what your business is worth. Selling to an employee shouldn’t mean settling for a lower price than you can gain from your business sale; at the same time, you need to be realistic.

An employee needs to have capital to invest or be able to obtain traditional financing. Some may be able to receive SBA goodwill financing. Otherwise, you may need to be willing to offer seller financing in order to make the deal possible. You can help determine your employee’s capability to manage business finances based on personal financial history, such as credit and savings reports.

As you consider your options for selling your transportation business, don’t overlook the fact that your ideal buyer might be right under your nose.