If you decide to sell your business, at some point you will have to disclose the sale to your employees. There is no way around it and it is a very delicate and risky matter. If you tell them too early, they could become worried about job security and start looking for work elsewhere. They could also leak information about your company and threaten the confidentiality of your sale. This could result in competitors trying to steal customers, as well as customers and vendors becoming worried that the business is failing. If you decide to tell them after the sale, you may be struggling to hide information from them throughout the process. This can definitely present you with a double-edged sword. So what is the right move?
When to Tell Your Employees You are Selling
Even though it can be tough to conceal information from your staff, the best option for the health and stability of your business is to wait until right before, or right after closing, to tell your them that the business has sold. That doesn’t mean you shouldn’t tell any employees at all, but you will want to keep most of them in the dark. Waiting until after the buyer’s due diligence is over drastically reduces the risk of the deal falling apart. It also allows you to introduce the buyer shortly after, giving your staff less time to worry.
Protecting employees from their own anxiety gives you the most control over the sale process and the confidentiality of your business. If they find out you are selling, you lose control of the narrative. Even if you have a positive reason for selling and the best of intentions, they may end up thinking that the business if failing or that they’re all going to be replaced. During the sale, you cannot afford these distractions or confidentiality risks. They will directly affect your bottom line and you need your company to continue to run smoothly to be more marketable and prevent any pending deals from being spoiled.
Telling Key Employees About the Sale
Depending on how your business is structured, you might have to tell some key staff members about the sale. Your accountant or bookkeeper will need to know, so they can help you to organize and present financial statements to the buyer. You should also make your top-level managers aware of the sale so they can help keep operations smoothly throughout the process. Make sure your business broker also develops a good working relationship with these key employees, so that information between your company and the buyer can flow quickly, and keep momentum going.
How to Tell Your Employees You are Selling
When you are ready to tell your staff, gather them all together at once, at the beginning of the week. Never break the news to them on a Friday, because they will go home and worry about it all weekend. Granted, there are some industries where employees work weekends and have days off in the middle of the week. In that case, try to get as many employees together, doing your best to avoid the eve of a big off day. Let them know how much you appreciate their hard work and loyalty, and that they are important to the success of the company. Then state your decision to sell and explain your reasons for doing so. Tell them about the buyer and their qualifications, reassuring them that you picked someone who you feel will be a good fit for the business and that their jobs are safe.
Once you have broken the news, introduce the new buyer as soon as possible, preferably immediately after the announcement. By doing this, buyers can start connecting with the new owner right away, and won’t have extra time to create false assumptions and expectations about what they will be like. When announcing the sale, keep the whole meeting positive and try to make it exciting, so your staff feels optimistic about the future of the company.
Deciding to Tell Your Employees Up-Front
If keeping the sale of your business from your employees doesn’t seem right to you, and you have considered the consequences of telling them early, you may let them know upfront. It is not recommended, but there are business owners who have made it work under the right circumstances. When telling them, emphasize the importance of confidentiality in attempt to control the spread of information about the sale. Consider incentivizing them to stay with the company past the closing date, perhaps with a post-sale bonus.
There are potential benefits to letting employees know about the sale. One of your employees may be interested in buying the company themselves, or know someone who is, although they will also have to be financially qualified. Another benefit is transparency. If you have a serious buyer and are comfortable with allowing them to meet with some key staff members, that openness could show them that you don’t have anything to hide. It could also reassure the buyer that they are purchasing a business with a capable staff.
Choosing when to tell your employees that you are ready to sell your business is a personal decision. Whatever you decide to do, make sure you consider the consequences of your decision. In general, it is best to make as few people as possible aware of the sale. Do not underestimate the importance of confidentiality. While public business sales work for many companies, most are better served keeping knowledge of the sale under wraps. This prevents deals from being sabotaged and allows the business to operate normally throughout the sale process, with minimal distractions.
Have you thought about selling your business? There are numerous intricacies in every business sale, besides just how you deal with your employees. Sellers who try to manage the process on their own often run into obstacles that slow the process or kill negotiations. When selling your company, small mistakes can be very costly and are avoidable if you have help. The brokers at Corporate Investment Business Brokers (CIBB), headquartered in Fort Myers, have the knowledge and experience to help you manage the sale process and make sure your sale is smooth and successful. Contact us to obtain a free business valuation estimate and see how we can help you.
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