If your business is ready to be sold and you have an inside buyer, some friend, family member, staff or other known party, you can sell to them, perhaps with more confidence.  However, there are cautions to take.

1)   Don’t short yourself on seeking professional advice from your accountant, attorney, and broker.  They can each take a role in helping you to ensure a sound transaction.

2)   Use someone, perhaps a business broker, to facilitate the transaction, much as they would with a buyer they found for you.  This allows you to keep arms-length from the transaction and end up with a more appropriate price, documentation, vetting of the buyer.  Avoid having transaction-related conversations directly with the buyer.  Allow the person managing the transaction to do that for you.

3)   Vetting the buyer?  Of course.  If it is a cash transaction, this may be less important at least relative to money but you may not want the business to fall apart even if you did receive all of your cash.  Someone to manage the transaction will help you to see the flaws in the buyer.  If you are financing the transaction you cannot count on the truth about credit worthiness just because you know the person.

4)   Relative to the terms of the agreement, include the things that a normal transaction would include and have the final documents drafted by an attorney.

5)   You may discount the sale price because the routine commission fee is not included but consider carefully whether you really want to give away the store.  At some point if the business closes, you figure out you really DON’T like the buyer, or, if you are not paid, you may find you are bitter about having discounted.

None of this is to say you should not sell to the insider.  It is only to say that as much caution should be taken here as in another transaction.