When your business has a net profit (EBITDA) over $1 million dollars and you are thinking of selling…
Be sure to ask questions and learn about an Employee Stock Option Program (ESOP), here are some of the attributes of this alternative:
- To qualify the company needs at least 15 employees and have a net income (EBITDA) of over $1 million dollars.
- Your employees who helped you build the business, can become the owners without them putting any cash into the transaction.
- There needs to be management in place to step-up, or the seller (current owner) can stay on for a period of time to be determined, or until he/she is paid in full.
- There are many factors which establish value of a business, but many businesses in the $1M to $3M profit range will have a value of X3 or X4 unless there is something extraordinary about it.
- With an ESOP, the value is in the EBITDA X5 range, with many tax advantages for the Seller.
- A third-party professional will advise and prepare the transaction as well as help to arrange a bank loan to provide the seller with an approximate 33% cash payment at closing, the loan paid back in PRE-TAX DOLLARS, so speed up then repayment process.
- Once the bank has been paid-off in two or three years, the Seller can start to be repaid; typically, over five years at a interest rate of approximately 10%, again with PRE-TAX DOLLARS.
- There is much more to this, this is a high-level snip-it.
Dolan Sales, Inc. can help you learn more using third party professionals and to ensure your company is qualified. As the seller/owner, you may discover that an ESOP may not be the right choice for you and can help you sell your business by conventional methods, confidentially, which is typically, all cash at closing. Call Bob Dolan on his cell at 954-579-4687 or email firstname.lastname@example.org.