Selling to a Buyer You Already Know

Three buyers, one difference

A child, a co-owner and the general manager are three different conversations, and they share the thing that makes all three unlike a sale to a stranger: you already know who is buying, so nothing about the deal is set by a market. There is no auction, no second bidder, and no price discovered by putting the business in front of people who have never seen it. What replaces the market is your own argument for the number, made to somebody who will still be in your life after the wire clears. That is the whole of what is different, and everything below follows from it.

What a known buyer can and cannot pay

The constraint is almost always the money rather than the willingness. A child who has never held equity, or a manager who has not, is a complete change of ownership as far as a lender is concerned, and the standard rules for buying a business apply to them exactly as they would to a stranger. A co-owner already on the cap table is treated differently, and the difference is large enough to decide the shape of the deal. Read the financing rules on the buyer's side before you agree a structure, because the person across the table will be reading them too.

The price still needs an outside anchor

A number nobody else bid on is a number both of you will re-argue later, usually at the worst moment. The way through is the same evidence a stranger would have used: what businesses like yours have sold for, what a buyer can finance against your earnings, and what your own books say after they are recast the way a buyer will recast them. Put the anchor in writing before you name a figure. An owner who says the number first and finds the reasons afterwards has started a negotiation they cannot win, because the other side already knows how the business really runs.

What you are trading, in both directions

You are trading price for certainty, and it is a real trade rather than a consolation. A known buyer does not walk during diligence over something they already knew, does not need six months to understand the customer list, and does not put your staff through a stranger's questions. What you give up is the number a competitor might have paid for the same business, and what you take on is concentration: a seller note to somebody you cannot easily sue, and a business whose new owner you will see at Christmas. Decide which of those you can live with before you open the conversation.

Before you say it out loud

This conversation cannot be taken back. Telling a manager you are thinking of selling to them tells them you are thinking of selling, and if the deal dies they now know that and may leave. Telling one child changes the others' expectations whether or not anything follows. The confidentiality problem is the reverse of the usual one: the risk is not that word gets out to the market, it is that word gets out inside the business. Work out what happens to the relationship if the deal does not close, and be able to say it plainly, before the first conversation rather than after the third.

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