How and When to Tell Your Employees You’re Selling Your Business
Congratulations on selling a company!
As an entrepreneur, selling a company is a wonderful achievement. You’ve proven that you can deliver results in the form of sustained profits and a positive market value. This is evidence of future profits and success for the new owner.
No doubt you’ve been thinking about your exit-strategy and your next moves for some time. You’ve run through the effect the sale will have on your personal and professional life. However, for your employees, they’ve been kept in the dark. The colossal changes in the office will probably come as a surprise to many. Most business owners will relate to their plight and will want to help ease this transition. However, telling them of your plans of selling a company prior to it being a “done deal” may jeopardize the process, as well as the price of the deal.
The Game Plan
There are some unique circumstances that might necessitate you to tell all of your employees about your upcoming sale early in the process. Nine times out of ten, it will be better to wait until the deal has closed to let your employees know all of the details.
In too many situations, if you come clean and inform your employees about a sale early on it’s troublesome. As a matter of fact, you won’t have much information about the things they want to know. That includes things like if everyone will stay on, who their boss will be, what changes there might be to their benefits, whether the new owner has different policies etc. This list could be a lot longer. Early in the sales process, you won’t have any answer to many of these questions.
What happens with little or no information? Employees speculate to fill in the gaps. You may have even experienced this phenomenon for yourself somewhere in your career: lacking validated information from a reliable source like the business owner, employees supply rumors or half-truths. This creative license with the situation can fuel panic and can be seen by your customers, which can have a financial impact.
Another issue when there is too much advance notice is an exodus of employees. When key employees leave to find more stable jobs, it can hamper a new owner’s ability to operate the business, reduce prices, and add more time to attract prospective buyers.
Delay the News
Though it might seem counter-intuitive and somewhat deceitful at first, it’s paramount for the success of the pending sale that you postpone the big announcement until all contingencies have been satisfied, and your deal is ready to close.
You may feel the need to share the exciting news, but resist the urge. If you let it out, it might spell trouble for the sale. In addition to the results mentioned above, it could also cause an unanticipated business disruption. Nonetheless, you’ll most likely need to let some key employees know of your decision early on in the process, in order for them to help provide information to prospective buyers. When you do select these employees to tell, make sure you stress the information is confidential until you tell them otherwise.
When you’re ready to discuss the news with your staff, here are a couple of ideas that might cushion the blow for employees and for your customers. Firstly, challenge your employees to take ownership of their jobs and feel confident about their roles in the company, regardless of who owns the business. Secondly, you can help them with business acumen and leadership skills by encouraging them to become actively involved in important management projects.
Once your employees come to realize that the company can operate without you, they’ll be better prepared to work for a new owner. Nonetheless, many owners selling a company will incorporate a transition period into the process. This will help the owner to stay involved with the business after the sale closes. This lets the seller help to solidify the evolving relationship between the new owner and the employees.
When the time comes to break the news to your employees, think Abe Lincoln. Honesty is always the best policy. You’ll have all of the information you need to answer their questions. You can emphasize that the ownership transition is a “win” for everyone involved. Be positive and let them know that you are confident that the new owner will treat them well. Try to select the new owner based in some part on the fact that they share your values. Let the employees know this — it will be reassuring in a stressful time. Furthermore, plan on taking the time needed to answer their questions. Working with a business consultant like Andrew will give you plenty of preparation for this meeting.
Andrew is a 36 + year business owner and has negotiated hundreds of business transactions in cities throughout the Sacramento Region. He’s worked with business owners in Citrus Heights, Rancho Cordova, Folsom, Elk Grove, Roseville, Rocklin, Davis, El Dorado Hills, and Cameron Park. Andrew can help you with deciding on an appropriate buyer and answer all of your questions.
Take the time to speak with professional business broker Andrew Rogerson. He knows about selling a company in Sacramento. Please visit our website Services.
You can also get in touch with Andrew via email or call him at (916) 570-2674.