It would be fun to write an aggressive “stick it to the man” article, but this will not be that. Instead, I will be exploring the much more common scenario where a manager, or group of managers who run a business for an absentee owner think to themselves, “we are doing all the work and creating all the value, why don’t we buy all or part of this company?” – which happens a lot more frequently than you might think.
Baby boomers (who are now in their seventies) have left for warmer climates and frequently have cash cow businesses being run by talented managers in their forties and fifties.
In fact, they might be the best buyer. We have a great graphic about this situation here. These are the managers that created the historical value and profitability.
I know what you’re thinking…..”I don’t have millions of dollars.” It’s OK.
If you want to buy the business you work for and you have a reasonable valuation agreed to with the owner – there will be money available. There is a LOT of money available to help a manager buy a business, especially when that manager has grown the business and is committed to the future. This may seem like the scary part, but in reality it can be a way for you to create equity in the business while only having to put a small amount of your own capital into the transaction.
Now – here’s the tricky part. There is SO MUCH money out there you might be tempted to run with the first group that offers to give you millions of dollars of support and backing. I know. It’s flattering and a bit heady. Don’t do it.
You really need someone to manage several relationships in this situation. Not just one. If you only go to one group, you may think you have financial backing to buy the business and mention it to the owners, but if that group backs away you have nothing to fall back on. You need an investment banker or M&A advisor to manage several of these relationships to make sure you are going down the right path with the right group.
And – the place where we see managers really lose value is when they begin to think they are being disloyal.
Managers often think that business owners will think that they are being sneaky and trying to steal a business out from under them.
They won’t if you position it correctly. There is nothing disloyal about asking to buy the business that you have grown and nurtured. You aren’t asking the owner to give the business to you, you are asking them to sell it to you for a real, market based price. And if you think that they will want to sell it in the near future, having this conversation with them might even be a relief. Obviously, each situation is different and this conversation has to be done tactfully, but there is a way for both sides to win.