One of the most frequent conversations we have with our clients is helping them select the right time to tell their employees that they have decided to sell the company. For many owners, this is a particularly difficult subject during an emotional time. Business owners feel loyalty to their employees and want to be honest with them. After all, these employees have helped them build a successful business, right?
Don’t they owe it to them?
Usually the owners have three choices:
- Tell everyone right away as soon as they have made the decision to sell;
- Tell everyone just before or just after the deal is finalized; or
- Tell only a few people right away and tell everyone else after the deal has closed.
The option we recommend most often is to wait and tell everyone after you have a deal. There are exceptions, of course. You may need to bring in the CFO to gather information. But generally speaking, the longer you can hold off on telling everyone, the better.
We have found that if the employees are told too early in the process, it can have a detrimental effect on them, the owner and the entire process, such as:
- Employees may demand higher pay, due to the uncertainty around what a buyer may do with the business and what their individual roles may be in the new company.
- Employees may begin looking for other jobs. They may be afraid of the uncertainty surrounding their roles under new ownership and begin looking for a new job, leaving the owner short staffed.
- Employees may become increasingly restless, distracted, and unproductive, resulting in declining sales and profits, which translates into a lower purchase price for the owner of the business.
Regardless of when you decide to tell the employees, there are a few points to remember:
Tell them why you are selling. Be as genuine and transparent as you can during this conversation. The key here is to help soften the shock factor. The news will take a while to digest, and employees will have questions that you may or may not be able to answer depending on when you decide to tell them. This is one of the reasons we recommend waiting until later in the process. Too many uncertainties are scary.
Communicate your excitement about the buyer. Besides being financially qualified, you should share the reasons why you selected this buyer. Why did you believe they were a good fit to carry on your legacy? It is important for the employees to know that one of the reasons the buyer wanted to purchase the company is due to the individual contributions made by them. In today’s tight labor market, buyers do not have a bus load of replacement employees waiting in the wings. Once a deal is imminent, the buyer should plan to meet with everyone individually and be prepared to answer questions about potential pay or benefit changes.
Finally, once you have told the employees, be sure and provide an expected timeline of when things will transition and when you anticipate leaving the business. The more you are able to communicate during this phase, the better it is for everyone.
Remember, selling your business can be a long emotional process, and while you are worried about moving on, your valued employees will be saddened by your departure and the change in their daily routine. By communicating openly and honestly, the discomfort for everyone will be minimized, allowing everyone to move on at a quicker pace.
Nancy Rolland has more than 20 years of experience sourcing, managing and executing mergers and acquisitions activities for multiple Fortune 500 companies as well as small business owners. Nancy can be reached at [email protected].