Selling Your Business: How To Tell Your Employees
The sale of a business is a major milestone for an entrepreneur. In fact, your exit-strategy probably has been top of mind for months, even years, and you’ve had ample time to process how the sale will impact your personal and professional life.
But your employees? Not so much. In fact, they’ll be shocked to learn that they will soon be answering to a new boss. As a compassionate business owner, you want to help ease the transition for your workers. But telling them that you’re planning to sell before a transaction is complete could jeopardize the timing and price of your deal.
So what do you do?
Although there may be unique circumstances that require you to inform all employees about your sale intentions early in the process, it’s almost always better to wait until the deal has closed to bring your employees up to speed.
For one thing, if you inform your employees about a sale too early, you won’t be able to answer many of their questions. Faced with an information vacuum, your workers will fill the void with rumors or half-truths that can create panic should they trickle down to your customers. Another concern: too much advance notice can trigger an exodus of employees. Not only can that cripple a new owner’s ability to operate the business, it often reduces the sale price and lengthens the amount of time it takes to attract prospective buyers.
So as much as possible, it’s important to delay the announcement of the sale until all contingencies have been met and the deal is in the final stage.
The caveat is that it will probably be necessary to bring a few key employees in on your decision early in the process so they can help provide information to prospective buyers. Choose these employees carefully and emphasize that the information is confidential until you have told them otherwise.
Once you’re ready to talk, there are a few things you can do to soften the blow for employees and customers.
For starters, employees need to be encouraged to take ownership of their jobs and feel confident about their roles in the company, no matter who owns the business. By encouraging employees to become actively involved in important management initiatives--such as creating operations manuals and documenting job descriptions--you are helping them build their leadership skills.
Once your employees recognize that the company can run without you, they will be better prepared to work for a new owner. Still, you may want to build in a transition period in which you’ll stay involved with the business after the sale has closed. This transition period allows you to make sure that the evolving relationship between the new owner and your employees is a strong one.
When you finally do sit down with employees to break the news, it's best to be upbeat and honest. Reinforce the message that the ownership transition is good for everybody and that you have full confidence that they will do right by the new owner. If you've picked the new owners because they share your values, explain that important fact to the staff. Be prepared to answer their questions, as your employees will likely have many concerns about how new ownership will impact them.