Five years ago, an owner of a 30-person consulting firm faced some serious health issues and desperately needed to take time off. Luckily, a key employee stepped up to take over the reins and did a fantastic job running the company while the owner took care of herself.
It seemed like a win-win for everyone. The owner was banking on this manager to take over, buy her out, and fund her retirement – when the time was right.
Finally, several years later, the day came when the owner decided she was ready to get out.
There was only one problem – she never had her key employee sign a “non-compete.”
Now, the tables were turned. The employee was more than happy to buy the business, but on his terms – a much lower price than what the business was worth.
The employee threatened to walk and start his own firm, taking all the customers and employees (who were now loyal to him) with him, if the owner did not agree to his terms.
The owner had no other choice. Having lost all of her leverage, she was forced into a less than favorable sale of the business, which really hurt her retirement plans.
This could have been prevented if the owner had taken the time to develop her exit plan, provide an incentive for the key employee and implement a non-competition agreement. The outcome would have been completely different and she’d be sailing off into the sunset (or whatever her retirement dream was).
Don’t be forced to sell on someone else’s terms!
You need to be fully versed in all of your options and how to execute them before you make any decisions.
Register for our next workshop Rebuild Your Business with Your Exit in Mind.