How to sell your business if you have independent contractors working for you?
There is no guarantee they’re going to stay unless the independent contractors agree to sign contracts making them bound to stay.
That has been the challenge of the industry for years.
We’re all working with independent contractors. There has to be a fine line between independent contractors versus employees.
If you hire employees, you would have to pay employment taxes for 7 years and nobody wants that.
It is important that every entrepreneur understands the importance of classifying independent contractors and employees.
You should consider this, especially if you run a small business or own a startup. Even freelancers working with subcontractors should take this into account.
Having employees will give you more control, but you’ll also have more compliance responsibilities. Using contractors means fewer compliance obligations, but less control.
Now, what happens if you want to sell your business that has independent contractors?
Are there any ways to keep them from leaving despite the transition?
The following are important factors to consider:
There needs to be transparency if you want to sell your business so that expectations can be set. You could also ask the people within your business if any one of them is interested in buying it.
There may be someone there who wants to purchase your business but doesn’t know how to run it.
Putting a strategy in place is something that you can do to help them. That would make a nice gift.
There should be a clearer agreement stating all the things needed if you’re going to sell your business. The independent contractors are going to stay in the business despite the change in ownership.
You need to get your independent contractors to sign that agreement.
The contract should specifically state if they will stay a minimum of 6 months or 3 months. Then, it’s up to the new owners to keep them.
Whether they will stay after 3 or 6 months is no longer your job, that’s the new business owners’ job.
Selling your business is like being a landlord since there isn’t much to sell but furniture. If you have contracts in place, then you have contracts and furniture to sell, which is an added asset.
Remember, an independent contractor contract that pledges to stay even if the business is sold is different from an independent contractor agreement that simply stipulates, “Here’s what I’m required to do.”
Sell Your Business: The Bonus
What other opportunities can you offer when you sell your business that are sexy?
Look at what incentives you can give so you can attract contractors or get them to stay.
Like for real estate, look at what real estate owners are doing to get tenants at the door. Usually, it’s the upgrades, improvements.
For salon business, do the contractors need shears? Do they need equipment?
Can you have an equipment bonus for them? For other industries, can you do advertising for them as part of their bonus?
Look at other industries at how they are getting signing bonuses..like free rent, equipment, education. And then you can get them to sign a year-long, or maybe 6 months, or 3 months agreement.
Almost every industry is changing from conventional employment to independent contracting.
Professionals working in seasonal positions are increasingly choosing to utilize their valuable skills in an open market that allows them to control their own careers.
You should consider these talents as one of your business’s assets.
Consequently, it is important to ensure that they stay in the business when you sell it.
It can be scary, but you have to have an open conversation. If you intend to sell your business, you must be transparent. That’s the risk you take. You would want to create a relationship with trust.
Looking for more juicy business tips and strategies? Join us at the Step Into the Scale-Up Masterclass happening on Aug. 24th. Take our Operations Assessment to prepare your business for scale-up!
Watch this video to learn more juicy tips about how to sell your business with independent contractors.