Two Strategies for Dealing With Employees When You Sell Your Business

The way you address your business sale with your employees can ultimately affect the success of the sale. Owners, experts, and advisors typically advise one of two strategies. Some advocate complete transparency from the very beginning. Others argue that, when employees know a sale is imminent, their morale may deteriorate, along with their productivity. Here is a brief overview of the two strategies.

 

Keeping Employees Informed

Revealing your plan to sell your business doesn’t necessarily require that you share everything. Employees don’t need a detailed blow by blow of the process. Instead, stick to the big picture: the reasons for the sale, how it might affect them, and what you hope to achieve. Manage your staff’s expectations by giving them more information when the transaction is completed. And encourage them to discount any rumors.

Do you hope to sell to a buyer who will retain your existing employees? This information can ease employees’ fears of a job loss, and potentially keep them on board. If you can’t make such a guarantee, emphasize that a strong performance will serve as a safety net, encouraging the new owner to retain as much of the existing staff as possible.

If you feel uncomfortable telling your entire team about the sale, consider sharing your plan with just a few key employees. These should be people who understand the business, and who can therefore understand your reasons for selling, as well as your reasons for keeping the sale quiet. These employees will appreciate your trust in them, and see your willingness to share the sale as a sign of confidence.

 

Keep It Quiet

There’s no denying that a potential sale can spur anxiety, confusion, and even a mass exodus among employees. Knowing this is a compelling argument for keeping the sale under wraps. It may be best to adopt a business as usual approach, particularly in light of the buyer's need to secure financing, the need to ensure all contingencies are addressed, to manage leasing and escrow, and to address other issues.

Employees who know about a sale may even tell your customers. Anxiety about pending changes in management, quality or policies can cause your customers to flee to the competition at a time when this can be extremely damaging to your business.

But what if word gets out in spite of your best efforts? Confront the issue head on, because cover-ups and denials rarely succeed. Immediately convene a meeting to answer employee questions. Don’t delegate this vital matter to a subordinate, or address it only in an email. Address possible outcomes at the outset. That includes the possibility of positions being eliminated. Even if that conversation is a difficult one to have, a proactive stance is always the best stance. And if you’ve encouraged the new owner to retain your staff, you can share this information.

Put simply: by getting ahead of the rumors and being honest, you can ensure you provide information, rather than relying on the rumor mill to do so. Once the cat’s out of the bag, you can’t put it back in. So take control.

Also, a third approach is perhaps a hybrid approach, and although it may seem “unfair”, it’s probably the most truthful approach; that is DENIAL at ALL COSTS! In real world M&A circumstances, transactions are very, very difficult to get done, and can completely blow apart at the last minute (the closing table). It is simply not worth giving employees something extra to worry about that may never affect them. The truth is, the owner has ABSOLUTELY NO WAY OF KNOWING if his business will sell until the wire has happened and the ink is dry. The fallout from the thousand ways informing others can go wrong is simply not worth speculating over. There is a time to address all parties, and that is usually after the close! Buyers also feel their interests are best protected as well.