Should You Sell Your Store To An Employee? | Silverman Consulting & Retail Services

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It’s never easy making the decision to sell your retail store.

There’s a lot to consider and plan.

You’ll need an exit strategy to extract as much money as possible in order to move on to the next phase of your life.

Another important consideration is whether or not you should sell your store to an employee.

There are a lot of different factors that go into selling your store to an employee, or a group of employees, that you have to think about to determine if it’s the right decision for you.

At Silverman Consulting & Retail Services, our selling a retail business marketing consultants will help you liquidate your assets and assist you in ownership transition.

Let’s take a closer look at the benefits and drawbacks of selling your retail store to an employee.

Benefits Of Selling Your Store To An Employee

When you tell your employees you’re closing your store, one of them might ask about selling to them instead.

And this does have its benefits.

Transferring your business to your employee, or group of employees, can make the process go more smoothly instead of selling to an unknown party.

It can also help maintain the company culture and cohesiveness.

Here are some of the benefits to consider if you’re thinking about selling your store to employees.

1. They Already Know How Your Store Runs

Because the buyer has been an employee in your store, they are aware of how the store operates.

They will be able to handle common problems that arise and quickly strategize on how to fix them.

They also already know your current employees and their specific roles and skill sets.

This can help streamline tasks and operations by knowing who to go to for a specific job or problem.

They also understand the day to day operations, so they know what goes into production, sales, team communication, and budgeting.

Furthermore, having been an employee for the company, they are well aware of the company’s culture and dynamics.

This will enable them to efficiently communicate with and retain both employees and customers.

2. Your Customers Already Know And Like Them

When the new business owner is a former employee, they are generally less likely to implement major changes.

Major rebrands and overhauls can change the business significantly and potentially deter loyal customers.

By retaining the store’s traditional products and services, they can maintain the business’ long standing clients.

They know the customers and the customers know them.

This familiarity in both customer relations and the way that the business operates can make the transition and ongoing growth of the store more efficient and stable.

3. The Transaction May Go More Smoothly

You, as an owner, already have an established level of trust and communication with the employee interested in purchasing your store.

This can help the whole transaction process go much more smoothly.

Because you both understand the business, any issues that come up can be discussed much more efficiently.

Furthermore, because the employee knows the ins and outs of the business, less due diligence needs to be done.

You can also advise your employee turned purchaser on client, bank, and other third party contacts to keep operations running smoothly.

4. You Can Still Work At Your Old Store Part Time, If You Like

It may be difficult for you as an owner to hand over the reins of the retail store you spent so long building up.

Part of you may still be tied to it and to the relationship you have with your employees and clients.

When you sell your store to an employee, the transition can be more gradual.

You can slowly mentor them into taking over the store.

When the transfer of ownership is complete, you can arrange to still be involved in some of the business operations until you’re ready to retire or move into the next phase of your life.

This can be particularly appealing if you’re getting out of retail because you’re ready to retire.

Drawbacks Of Selling Your Store To An Employee

We’ve covered some of the potential benefits to selling your store to an employee, but there can be drawbacks as well.

It’s important to consider every aspect in order to make the best decision that benefits you and your future.

Let’s take a look at some drawbacks associated with selling your store to an employee.

1. Your Employee Might Only Have A Small Down Payment

Purchasing a business can be very costly.

Many employees of a business may not have enough capital to contribute towards a substantial down payment.

The employees looking to buy your business will likely need to secure financing and possibly seller financing to complete the transaction.

This means you yourself may have to provide a loan towards your employee purchasing your business, putting you at significant risk.

2. Your Employee May Not Realize The Level Of Commitment Needed To Run A Retail Store

Owning and operating a retail store takes a significant amount of commitment and responsibility.

It’s quite a bit different than just working there.

While your employee may be very good at their job and understand how your store operates, they may struggle with the demands of ownership and management.

To be a good owner they must be entrepreneurial.

This includes things like taking responsibility for the finances, delegating skills, and prioritizing tasks.

As an owner, you are tied to your store.

Your personal and professional life can easily blend together.

You know that, of course, but your employees may not.

If your employee is not prepared for this commitment, it can cause a lot of stress on them and the store.

If you seller financed them, it can also mean that you would have to step back in as the owner to ensure that the store continues to operate and you don’t risk financial losses.

3. You Might End Up Selling For Less Than What It’s Worth

When you decide to sell your retail store to an employee, the purchase price may revolve around what they are able to pay.

Unlike selling to an external buyer, in which case the price is based on the market value for the store.

The employee not having competition in the buying process and you not getting an accurate valuation for your business can result in you selling your store for less than what it’s worth.

This can make you potentially lose out on significant funds that you deserve for your retirement or next business venture.

So Is It A Good Idea?

It’s difficult to determine if selling your store to an employee is a good or bad idea.

The truth is that it depends on the situation.

Consider the benefits and drawbacks we’ve discussed above to help you determine a course of action.

The good news is that if you do plan on selling your store to an employee, Silverman Consulting And Retail Services can help.

We can plan a change of ownership store sales event to liquidate your old inventory, bring in new product on loan to increase sales, and help you get as much money as you can.

We’re here to help you (and your store’s new owner) prepare for the next stage of life before you transfer ownership.

Contact Silverman Consulting And Retail Services Today

If you’re ready to sell your business and move on with your life, we’re here to help.

At Silverman Consulting And Retail Services we want you to confidently secure your future.

We can organize a retirement sale event and ensure you get the highest value possible out of it.

This sale event can overcome some of the challenges we mentioned.

While celebrating your longstanding contribution to your community, a retirement sale event can reduce your in stock inventory significantly.

This can help reduce the purchase price for the incoming owner.

You can clean out dead stock accumulated over the years that would have little value to the new owners.

This means your store is not saddled with unsellable inventory.

This allows the now owners to start with a clean slate, setting them up for success.

Contact Silverman Consulting And Retail Services today.

Silverman Consulting & Retail Services
229 Yonge St suite 400,
Toronto, ON M5B 1N9, Canada
1 (888) 955-1069