How to Approach Your Employees About a Business Sale
Selling a business is typically a very positive event for the owner(s). This is the time to cash in on the years of hard work building your business, and move forward to retirement, new endeavors, or whatever is in store for the next stage of your life. As an owner, you look forward to the business sale, but your employees have an entirely different outlook.
The reaction your employees will have to the sale of your business is difficult to predict. For this reason, the decision on whether or not (and when) to disclose the sale to your employees is one that requires a great deal of forethought. There are valid arguments for both approaches; here is a summary of each:
Full DisclosureSome owners choose to be totally transparent and up-front with employees. If you decide to take this approach, it is not necessary to reveal all the details about the sale. Call a meeting after you have made the decision to list your business, and let your employees know how much you appreciate their hard work, and explain what is happening. Also ask your employees to keep the sale confidential and not reveal it to customers or anyone on the outside.
Here are some factors that can help alleviate the concerns of employees during a business sale:
– Commit to selling only to a buyer who promises to retain the existing staff.
– Reassure them that, although there will be a new owner, not much will change for them, provided they continue to maintain a high level of performance.
– If you plan to stay on for a while after the sale, let your employees know. This will give them additional peace of mind that things will stay consistent.
One approach that can sometimes yield good results is to turn the sale of your business into a positive for employees. For example, when you call a meeting, let them know that the company is experiencing tremendous success, and it is necessary to bring in a new owner with the skills to take the business to the next level. In other words, give your employees the impression that selling the business will open up greater opportunities for them.
Keeping it Quiet
There are several inherent risks when disclosing the impending sale of a business to employees. Here are some of the most important reasons to keep the sale quiet:
– Even if you ask for confidentiality, chances are at least one (or more) of your employees will talk. This is especially true if you have a fairly large staff. If even a couple employees talk, rumors get started, anxiety spreads among the staff, and employees may start to leave.
– Some employees might go so far as to tell customers/clients about the sale. This can cause some of your clientele to flee to competitors, resulting in a drop in business.
– Business sales are typically based on several contingencies; mainly, these contingencies come down to the buyer wanting reassurance that it will be “business as usual” once they take over. For this reason, any major disruption stemming from employee leaks could jeopardize the entire transaction.
The Middle Ground
One possible compromise approach to employee disclosure is to inform only a few key employees, and request their confidentiality. Of course, these should be individuals whom you believe you can trust, and who fully understand the delicate nature of the transaction, and the importance of keeping things quiet.
Ultimately, the decision on if/when and to which employees you want to disclose the sale of your business is dependent upon your specific circumstances. If you decide to work with a reputable business broker, your listing is always kept confidential, so from there, it is up to you whether or not you want your employees to know. Business intermediaries have extensive experience with these types of transactions, so they can also provide informed guidance on this question to ensure that you are adopting the correct approach (in regards to informing your employees).