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How to Sell Your Business
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Article 7: What, When And How To Tell Employees
You may find that selling your business is a traumatic event. After all, you’re losing an enterprise you have spent many years creating. But employees usually go through greater turmoil because they’re afraid of losing their jobs. Who knows what the new owners will do?
A successful sale, then, deals appropriately with the psychology of employees. Employees need to be informed about the sale at the right time and in the right way. Timing is everything.
“If you tell your employees too soon, the key ones might leave the company, and that can blow the whole deal,” warns Mark DiQuattro, a business valuation analyst in Belleville, N.J.
But just when is too soon?
“The general rule is to not tell the rank and file until you pretty much have signed an agreement,” offers Rick Rickertsen, managing partner of Pine Creek Partners, a private equity firm based in Washington, D.C. “There are so many reasons a deal can fall apart. So don’t disturb your employees until you are sure the sale is going through.”
However, there is also a danger in waiting too long.
“The buyer might not want you to break the news just before the sale or he might be left with a lot of resentful and confused employees on his hands,” says DiQuattro. “Give people a little time to absorb the changes.”
In a sense, you’re in a no-win situation. No matter what you do, your employees will feel disrupted.
“There is no upside in telling your people,” concludes Dr. William Rupp, dean of the college of business at the University of Montevallo in Montevallo, Ala. ”If you tell them too, early they will see you as a ‘quitter.’ If you tell them too late, they will see you as a ‘cheat.’”
There are some things you can do to make the sale less of a strain on your employees, however. First, you can make sure all of your veteran employees are on contracts that guarantee them a full year of employment. This will lessen their fears and also guarantee the buyer that skilled individuals will stick around. Also, you can arrange to stick around as a consultant either on or off site.
“Having the old boss around will help alleviate fears and concerns,” says DiQuattro.
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How to Sell Your Business
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