When (and how) to Tell Your Employees Your Business is For Sale
Most of the time when you are selling a business, you want to keep the fact that your business is for sale confidential for a number of reasons. This is one of the many reasons for hiring a Certified Business Broker. They help you find the right buyer without putting a real estate sign on your front lawn.
There are several reasons for keeping the sale of your business under wraps:
- Your competition: your competition would love to know you are selling your business and use that against you to steal your customers and clients.
- Sometimes your family and friends: It’s not that you don’t want them to know your business is for sale, but you don’t want them to say the wrong thing to the wrong person at the wrong time. Many business deals have been broken this way. The fewer people who know about the sale, especially details, the better.
- Your employees: of course you will have to tell them sometime, but if you tell them too soon, some might leave, anticipating the potential issues of working with a new owner. It could also cause stress and disruption in the workplace, impacting performance.
- Your customers: you don’t want your customers to know too soon about the sale of your business for the same reason you don’t want your competition and employees to know. They could potentially leave for your competition because new ownership creates uncertainty.
The key is, the fewer people that know you are selling your business and the more confidential all the details remain, the more likely the sale will be successful and the new owner will be able to continue to operate the business profitably.
But the day will come when you have to tell your employees. They can’t simply show up one day and find you gone, replaced by someone else. Here are some tips and tricks.
Risks to Confidentiality when Your Business is For Sale
There are ways that employees may sense that something is up, but it may take months to sell your business. Tell them too early, the deal may fall through, and you may have caused a disruption to business like the ones mentioned above.
Waiting has its own risks. Showing a prospective buyer around your business, leaving an open email on your computer or a paper trail on your desk may be enough to fuel speculation. If you give them too little information, your employees will fill in the gaps using their imaginations. It will be like a huge game of telephone, and by the end, you won’t even recognize the original message you sent out.
Employees and others may make assumptions that are not true: that you are selling your business because it is failing, or the “when he sells the business, we will be replaced” conversation will begin.
This is why you should always use your personal phone or email when communicating with your business broker and keep all documents out of the business space if at all possible. Failure to maintain confidentiality can quickly kill a deal.
Wait Until the Deal is Done
There will likely be some time between when the deal is done and when the new owner takes over the business, but not too much time. Wait until the deal is finalized before telling employees. This prevents the rumor mill, they already know the business is still strong, and they will be more likely to listen to what you have to stay and stick with the new owner.
This also helps you control the conversation and narrative about the sale of the business, and you will be able to share more of the details once you have something final in place.
This works for your regular employees and even your vendors, customers, and friends and family. However, there may be some people you have to tell earlier in the process.
Telling Key Employees Your Business is for Sale
There are certain employees that will interact with your Certified Business Broker at an early stage of the process. This includes an in-house senior accountant unless you outsource your accounting and senior management personnel. In most cases, you can trust these key employees to keep things under wraps until you are ready to reveal the sale.
The important thing is to allow your business broker to develop a healthy relationship with these employees early in the process, so you do not always have to be the middle man. This allows you to continue to run your business and keep things profitable, which is your key function during the sale.
A Note: Buyers may want to meet with key employees during the sales process. Typically, you would deny these requests until the deal is final.
What to Do If Word Gets Out
What if, despite all of your efforts, word gets out to your employees that you are selling your business? You’ll have to act fast to prevent disastrous results.
- Be honest. Don’t deny whatever caused the breach of confidentiality. Share with employees what is going on.
- Share enough, but not too much. Share why your business is for sale, why you are leaving, and be transparent in order to substantiate those reasons. Don’t reveal the buyer’s name and any details of the deal.
- Reassure them about job security. Reassure your employees that they are not being replaced, and the new owners do not plan to make major personnel changes.
- Stress confidentiality. Just because your employees know does not mean everyone needs to know, including vendors, customers, and others. Explain why confidentiality is vital to business success, and if necessary go as far as having employees sign an NDA. While not always legally enforceable, it gives them a tangible reason to be quiet.
Understand that no matter how well you handle an early reveal about selling your business to employees, it may have an impact on the sale of your business.
Confidentiality is key when your business is for sale. You must tell employees eventually, but delay as long as possible, only bring in the essential key employees when needed, and if the word does get out, handle things openly and honestly.
Have other questions about selling your business based in California? Need to know the value of your business before it is time to sell? Contact us here at Rogerson Business Services. We pride ourselves on professionalism, confidentiality, and helping you find the right buyer for your business at the right time.