Last episode I talked about the possibility of Selling your Business to your Employees and this week I would like to discuss the issue to Notifying Your Employees that You are Selling.
One thing that we have learned about our species is that while we are readily adaptable, most of us really do not embrace change and so the overriding mantra when deciding “when to tell your employees that you are selling”, is proceed with caution. As an owner, there are many roles to assume when selling – while you continue to run your business make sure you engage your various advisors on the transaction, your business intermediary/broker, solicitor and your accountant on the various timelines and approaches of the sale.
Breaking the news to your employees is one of the most difficult aspects of selling your business but also one of the most critical in terms of timing. There are always cases with special circumstances but the most common approach, is to keep information about the sale limited to as few people as possible – it is best to wait until the sale is near closing to communicate to employees, then later customers, suppliers – and the general public.
What then, are the reasons for waiting?
The primary reason is for strict confidentiality to prevent employees (and customers or vendors) from assuming that there is something wrong with the business and putting a successful sale at risk. Telling your staff that you are selling too early in the process is risky – it stirs up a fear factor, and, they may get nervous and want to jump ship. Loosing your key employees, one of the most valuable assets that a new owner is counting on to keep the business running and part of your commercial goodwill, can have a negative effect on the outcome of value for a prospective buyer. Not to mention if any of your employees disclose this information to your competitors, your competitors may use this information about the sale of the company against you…by making alarming fear-based statements…it has been said: “loose lips sink ships”.
Both employees and customers get apprehensive about this unknown factor – common questions arise that cause employees to flee: Am I still going to have a job upon the sale? What if the new owner replaces me with members of his team? Will I get along with the new guy? Employees can inadvertently spook your buyer by words or actions that could sabotage your plans and cost you a sale.
When and How do I tell my Employees?
I’ll say it again, maintaining confidentiality surrounding the sale typically takes precedence over other concerns. After being sure your transaction is solid and close to closing, this may be the time to call an employee meeting – being forthright in a timely manner with your employees can help to control the rumor mill. Depending on the size and the nature and culture of the business, this announcement can take the form of a group meeting in a conference room or, if more appropriate, meet individually – its more sincere.
At this meeting you may want to invite your buyer to be present – this may give the impression of a united front, a changing of the guard and the new owner may have some words of assurance to tell the staff to ensure a smooth transition. Explain the company’s changeover strategy. At this time, you may want to regulate how much access a potential buyer has to your key employees – ensure that you are far along in the transaction before you are comfortable providing this access to your team.
Sometimes, bringing key personnel into the decision making a little earlier and garnering their buy-in can ensure continuity and maintain momentum under new ownership. Employees should be told about the benefits a new owner will bring. These include dedication to building the company, plus financial infusion for sales, marketing, equipment or even new facilities.
Once employees have their fears satisfied, they’ll want to know what happens next. Keeping communication channels open throughout the ownership transfer will help toward achieving a seamless transition.
Sooner or later, you will have to tell employees about the sale of your business. Remember, proceed with caution, consider the type of business you own, the type of buyer you expect to find and your relationship with your employees.