When selling a business, careful consideration must be given to how the company’s employees are handled. Your employees bring a lot to the table in a potential business deal. The best ones may add value to the company, and could be integral in closing a deal, so it is important to identify key employees before entering into the sale process. Conversely, your staff can also spoil a deal, if you don’t handle them properly and choose the appropriate time to tell them about the sale.
Some business owners have a good, personal relationship with their employees, while others may only know their top level managers on a personal level. It may be tempting to tell your closest or most loyal employees about a possible sale early in the process, but you could be putting yourself at risk if you do. One of the keys to selling a business successfully, and for the highest potential profit, is to maintain confidentiality. A lack of confidentiality can increase the risk of clients, vendors or employees abandoning the business before the sale is complete. Losing a key client, supplier or employee can make a substantial difference in the overall value of the business, and force you to settle for less or lose the sale.
If staff members find out about a pending sale at the wrong time, you could cause them unnecessary stress. This could affect their performance at work, and it could divide their time if they become preoccupied with finding new employment. With this in mind, you definitely don’t want to tell any staff members if you’re just tossing around the idea of selling. If you actually decide to begin the process, you will still want to wait to tell them, but plan properly before doing so.
The first step of telling your employees about the sale of your business is to make sure you are the first one to do it. This goes back to confidentiality. If you choose not to sell confidentially, you risk someone else telling your staff that the business is for sale before you get the chance. This can come from the rumor mill, but it could also come from interested buyers entering your business to ask about the sale. One of the smartest decisions you can make to avoid a situation like this is to hire a business broker. Business brokers are experts in listing business confidentially, and screening buyers, so that only well vetted, qualified buyers discover the details about your company, including its true identity. They have all potential buyers sign a Non-Disclosure Agreement, legally binding them to keep the information they learn about the business a secret. These are all major advantages that professional business brokers have over commercial real estate brokers.
Once you have found a serious buyers and a deal and closing date are in place, start preparing to tell your employees. Plan on telling key employees and managers before telling the rest of the staff. These should be your most trustworthy staff members. If your staff is small, you could opt for telling everyone at once, or telling just your most loyal or highest ranking employee first. A business owner’s relationship with their employees can vary, so use this advice along with your best judgement when deciding who to tell first. Just remember that the key goal here is to keep the business running stable and get your staff on board with the changes.
Go into this initial meeting with confidence and be prepared to answer questions. Your staff will need reassurance that they are going to be okay in this transition and you need to show them that you are in control of the situation. Share as many details as you are comfortable sharing, as the more they know the less anxiety they will have. Find a way to spark excitement about the sale so they feel like they have a reason to look forward to the new ownership. You will need your key team members to help ensure the deal goes through successfully so consider incentivizing them to stay through the closing of the sale. For instance, offer a bonus that will be paid out of the proceeds of the sale. This will not only help the transaction go smoothly, but also reduce the chances of them applying elsewhere while you are trying to complete the process.
If you own a larger company with a lot of employees, try to keep the sale of the business a secret from everyone outside of your most trusted staff for as long as possible. Closing a business sale can take a long time. Even if you have a potential deal in place it could still fall through. Rather than drag your employees through all of the ups and downs of a business transaction, it may be better to tell them when the deal has closed. At this time you can call a meeting where they have the opportunity to meet the new owners and ask questions. This will prevent the possibility of employees from quitting preemptively or sabotaging the sale. If you think that some of your employees are getting suspicious and you are worried about them figuring out that the business is for sale, create a cover story. This can help squash rumors about the business changing hands or at least buy you some time.
In the end, the more people you tell about selling your business, the greater potential you have for someone spoiling the transaction. The less who know the better, which is why confidentiality is a key component of selling a business successfully and efficiently. If you do decide to tell your employees that your business is for sale, make sure you let them know that you care about their futures and you are doing your best to protect them. If they believe that you’ve taken time to consider them it could go a long way in getting the support you need to finalize the deal.
If you own a Southwest Florida business and are thinking about selling it, but want to make sure the details of your business and its sale remain confidential, contact CIBB today. We have the experience and local expertise to advise you through every step of the process and ensure that only qualified buyers learn about the identity of your business. Call us at (239) 936-1718 to start with a free, no-obligation business valuation and discover the true value of your business.