As an entrepreneur, you want what is best for your business’s long-term health, and you’ll want to see what you’ve built pass into the right hands.
Of the many options for business conversion, we often overlook the most obvious: selling it to our employees, to the very people who have helped you build it into what it is today, in some cases over many years.
Is a collective employee buyout right for your business in the current context?
How to tell if your employees might be your business’s ideal buyer:
- They already have a strong sense of belonging within your business team;
- Many of them have been in their positions for several years;
- There are several employees in your team that are ready to share responsibilities for management and business development;
- Your company’s employees take its success to heart;
- Your business is in good financial health.
Do your employees have access to the necessary financing to carry out this transaction?
Even though access to capital is a common denominator in any business acquisition scenario, there are specific financing programs and financial products that are tailored to cooperatives in Québec: grants, loan guarantees, loans, patient capital, and tax credits are among the tools available for starting and developing a cooperative business.
The Québec government has established a Programme pour la Reprise Collective (Collective buyout program) for this purpose. This program helps defray the cost of evaluating your business and undertaking a feasibility study to ascertain your employees’ ability to acquire your company.
In cases where employees may not individually have access to the capital necessary to acquire the company, a collective buyout is an option for securing purchasing power and access to specific financing programs. Employees may procure loans for the buyout that can be repaid from scheduled salary deductions.
If the purchase price for the company is outside of the workers’ collective means, then it is possible for employees to become a Worker-shareholder cooperative (WSC). Once constituted as a WSC, employees can gradually buy shares in the company until the WSC becomes the majority shareholder or sole owner.
As such, you won’t be selling your company to its employees at a reduced price. Rather, you’ll have the opportunity to sell your company to buyers who are fully aware of the company’s real value!
Do your employees have the skills needed to manage your business?
The kinds of skills required to manage your business and make it grow are shared in the cooperative model by more than one person. The goal of this model is precisely that: to allow for responsibilities to be shared by more than one person.
Training and accompaniment are available for workers who are interested in launching a collectively-run business or buyout. This kind of training is available in management, skills development, and entrepreneurial knowledge-building, as well as in collective decision-making.
Are there some types of businesses that are better suited to a collective employee buyout than others?
Worker-run cooperatives are active in a wide variety of industries. Industries that require lower levels of capital investments, and where workers are a significant value-added element of the business structure are best suited to this acquisition model.
A profitable business that may not allow for a significant return on investment may not necessarily be of interest to an external buyer. However, when job quality is at stake, the prospect of collective employee acquisition could make the same company appealing for purchase by employees.
Are there examples of private businesses that have been transferred to employees via collective buyout?
There are numerous success stories of collective employee buyout leading to business transfers in the areas of manufacturing, information technology, education, health, telecommunications, and more.
