The Conversation That Starts It
How to approach your employees about buying the firm
Take the conversation off site, raise it at the end of the meeting, and ask one question: money aside, would you like to own a business like this? Then tell them why you think it should be them, hand them something to read, and let them go home and think.
Expect hesitation the first time. It is not rejection, it is unfamiliarity, and it is normal. This page covers where to have the conversation, what to say, why the first answer is almost never a yes, and what to do in the weeks after.
We sit down with your employee and their spouse. That conversation is easier coming from us.
Set Expectations First
This is a process, not a single meeting
Owners tend to picture one conversation with a yes or a no at the end of it. That is not how this goes. It takes several conversations spread over weeks, and the first one exists only to put the idea in someone's head.
The employee you have in mind has spent their whole career being very good at the work. They have probably never thought of themselves as the person who owns the place, and nothing in an engineering or surveying career teaches you how a firm changes hands. You are asking them to consider something they have no reference point for.
So the first answer is usually hesitation, and hesitation is not a decision. Read it as unfamiliarity and keep going.
Where and When
Setting up the first conversation
Where you have this conversation shapes how it lands. Get the setting wrong and a good answer never gets the chance to surface.
01
Off site, and genuinely confidential
Not the conference room, not your office with the door closed, not anywhere a colleague can read the room through the glass. Take it off site. Until the employee has decided what they think, this conversation belongs to the two of you and nobody else in the firm.
02
At the end of the meeting, not the start
Meet about something ordinary, then raise it as you are wrapping up. Opening with it turns an hour into an interrogation. Closing with it gives them the drive home to react in private, which is exactly what they need.
03
Plan on several conversations, not one
This is not an event with a yes or no at the end. It is a process that unfolds over weeks. Owners who treat the first conversation as the decision point almost always read the answer wrong.
What to Say
The four moves that make up the first conversation
Keep it short. You are not negotiating, you are finding out whether they want this. The whole thing should take a few minutes.
The question
Money aside, would you like to own a business like this?
Those first two words do the work. Left in, money is all the employee hears, and the answer becomes a guess about their savings account. Taken off the table, the question becomes the one you actually want answered: do they want this. The financing is a problem you already know how to solve.
The reason
Tell them specifically why it would be them
Not a compliment, a case. They run the projects, the clients ask for them by name, the staff already goes to them first. People who have never pictured themselves as an owner need to hear the evidence from the person who has watched them work.
The others
Name who else could buy it with them
Most employees find the idea more manageable when it is not theirs alone. If two or three of your people could do this together, say so. A group buyout splits the down payment and the responsibility, and it usually reads as more achievable to a first-time buyer.
The close
Hand them the brochures and end the meeting
Give them the Step-Up Legacy Plan brochure and the Buying Out the Boss brochure, and stop talking. Do not press for a reaction and do not fill the silence. You have asked the question and given them something to read. That is the entire first conversation.
Why the First Answer Is Usually No
Four reasons a good employee hesitates
None of these are about whether they could run your firm. Understanding that is what keeps an owner from giving up after one conversation.
The money intimidates them
They hear a purchase price and mentally compare it to their savings. They do not yet know that the bank lends against the firm's cash flow, that the business income repays the loan, or that key employees come in with as little as 5 percent down.
They have never done this before
Nothing in an engineering or surveying career teaches you how a business changes hands. Not knowing how something works reads as not being capable of it, which is a different thing entirely.
They will ask people who do not know either
The employee goes home and asks a friend, a sibling, a neighbor. Almost none of those people have bought a business, and unfamiliar usually comes back as risky. That advice arrives with more authority than it has earned.
A firm is not a house
Buy a house and you can walk through it. A firm is a few vehicles, some computers, and a great deal of goodwill nobody can point at. The value is real, but somebody has to explain it before a buyer can see it.
The Question That Comes Up Every Time
Explaining the personal guarantee
Sooner or later your employee will learn they have to personally guarantee the loan, and it will stop them cold. Every individual owning 20 percent or more of the new company signs one. The number on the page is large, and it is the first time the whole thing feels real.
The way to explain it is this: signing a personal guarantee is telling the bank you are willing to bet on yourself. People make that bet in other parts of life without flinching. They borrow to finish a degree, or take on loans to put a child through school, on the belief that the outcome justifies the obligation. Buying the firm they already run is a far better informed bet than either.
The other half of the answer is what bank approval means. Commercial loans with no real estate behind them are the hardest kind to get approved, so lenders work from three years of tax returns, the firm's cash flow, and whether the buyers can run the place. When a bank with its own money at risk says yes, that is independent confirmation the numbers work.
After the First Conversation
What to do in the weeks that follow
The first conversation only opens the door. What happens next is what determines whether a buyout actually comes together.
01
Give it a few weeks, then go back
Let them read, think, and talk it over at home. Then raise it again: have you given any more thought to owning the business. Employees who were startled the first time have often talked themselves most of the way there by the second.
02
Get the spouse in early
The spouse or partner decides more of these deals than anyone admits. Bring them in early rather than after positions have hardened. A spouse who has had their questions answered is the reason a buyout moves. A spouse who first hears about it as a signed obligation is usually the reason one dies.
03
Bring us in as soon as they are curious
There is a limit to how much reassurance can come from the person on the other side of the transaction. An outside advisor answers the financing questions, sits with the employee and their spouse, and takes the awkwardness out of the room. The sooner that happens, the better these go.
04
Let the structure do the convincing
Once there is a valuation and a lender in the picture, the conversation stops being hypothetical. The bank funds the purchase, you are paid at closing, and your people repay the loan out of the firm's cash flow.
Why Bring Us In Early
Some questions should not come from you
You are the person on the other side of the transaction. However straight you are with your employee, there is a ceiling on how reassuring you can be about the price, the debt, and what happens if it goes wrong. Those questions need an answer from somebody who is not selling them the firm.
That is most of what we do at this stage. We sit down with the employee, and with their spouse, and walk through the financing, the guarantee, and what the first year of ownership actually looks like. The questions people are too polite to ask their boss get asked and answered.
It also protects the relationship. The moments where an owner and an employee end up negotiating directly against each other are the ones that damage a firm. Putting an advisor in the middle keeps you working on the same side of the table.
First Conversation FAQ
What owners ask before they raise it
- How do I ask my employees if they want to buy the business?
Take them off site, raise it at the end of the meeting, and ask one question: money aside, would you like to own a business like this? Then tell them specifically why you think they would be a good owner, name anyone else who could buy it with them, hand them the brochures, and end the meeting. Do not press for an answer in the room.
- What if my key employee says no?
Expect hesitation the first time and do not read it as a decision. Most employees are intimidated by the money, have never seen a business change hands, and will go ask friends and family who have not either. Give it a few weeks, then ask whether they have thought any more about owning the firm. The second conversation is usually a different one.
- Should I tell my employee what the firm is worth in the first conversation?
No. Naming a price first makes the conversation about money before they have decided whether they want to own the firm at all. Firms in this industry generally trade at 5 to 7 times EBITDA, or 2 to 4 times SDE for smaller owner-operated firms, but the number that matters comes from an independent valuation, and that comes later.
- Should I involve my employee's spouse?
Yes, and earlier than feels comfortable. The spouse or partner carries real weight in this decision, and their questions deserve direct answers from someone other than you. Bringing in an outside advisor to sit with both of them removes the pressure of hearing it from the person selling the firm.
- My employee is worried about the personal guarantee. What do I tell them?
That signing it is telling the bank they are willing to bet on themselves, the same bet people make borrowing for a degree or to put a child through school. Every owner with 20 percent or more of the new company signs one. It is also worth pointing out that a bank with its own money at risk has already reviewed the firm and said yes.
- How many employees should I approach?
Start with the one or two people who already run the work, then consider who could buy alongside them. Group buyouts are common because they split the down payment and the responsibility, and a first-time buyer usually finds the idea far less daunting when it is not theirs alone.
- When should I start these conversations?
The best planning window is 3 to 4 years before you want to step back. This is a process of several conversations spread over months, not a single meeting, and every stage after it takes time as well. Owners who wait until they are ready to leave usually end up taking the first outside offer that arrives.
Something To Hand Them
Do not end the conversation empty handed
Your employee is going to think this over at home, and talk it over with people who have never bought a business either. Send them home with the version that answers the questions before somebody else answers them wrong.
The brochure is written for your employee. The owner guide is for you.
Before or After, Either Works
Have the conversation with a structure behind it
Call us before you raise it and we will tell you privately whether a buyout of your firm is financeable and who on your team could do it. Call us after and we will sit down with your employee and their spouse. Nothing gets back to anyone at your firm.