2. Talk with your successor to make sure you’re on the same page. Once you have the valuation in hand, you can start a serious discussion about purchasing the business. Your family member or employee may have considerations they haven’t shared with you, or a different timeline than yours. They’ll definitely have a lot of questions, especially if they haven’t been privy to the full financial data up to this point. They may need time to think about their ultimate goals and discuss the plan with their family. The transition from worker to boss can be challenging, and helping them understand the realities of what’s involved is critical to making the decision to move forward.
3. Plan ahead to make financing easier for your successor. Most owners think employees can’t possibly afford to buy the company because they can’t meet the SBA 20% down payment requirement. But selling to a partner may not require any out-of-pocket costs. So if you grant ownership as a partner to your successor, they may be able to buy you out without putting money down. There are stipulations, such as the length of time the employee has been a partner; the percentage of ownership must be consistent (or increase) for at least two years. The sale must also be structured as a stock sale rather than an asset sale.
4. Make sure you have a clear plan in place for defining your role. If you plan to stay on in the company after the sale, you’ll need well-defined constraints regarding your authority and responsibilities. It can be hard to give up being the boss, and even the best of relationships can become strained when there are conflicts in style or judgment. It’s a good idea to have a formal agreement that covers the timeline, the structure of your roles, and other details that should not be left to a simple handshake agreement.

If your successor isn’t licensed, you’ll need to make sure that happens as soon as possible (another reason to plan at least two years ahead.) Requirements for licensing vary by state, but a key employee will almost certainly have met the experience requirements. They will need to pass the exam so they can transition the company to work under their own license.

5. Hire a business intermediary to draw up documents and facilitate the sale. Whether you’re selling to a stranger or your best friend, negotiations can become contentious. A business broker can help both parties navigate the process, keep communication flowing, and help structure the deal so both you and your buyer are protected and get full value from the deal.

Selling to a family member or key employee can be a great option for many owners. Following these five steps will ensure that both you and your successor feel like you’ve made the right decision.