Opinions expressed by Entrepreneur contributors are their own.
The process for exiting a business is about so much more than numbers and contracts; it’s about the people in your organization, from the front-line employees and executives who have created the business’ value to the leadership team that lands the deal at the most favorable terms. Your people have been at the heart of your organization, but their involvement in the exit process needs to be thoughtful and delicate – requiring trust and discretion. Here’s how to support them throughout the transaction.
Before the sale — say nothing
When should the owner inform employees that the business is being sold? Not until the sale is final and the buyer has officially taken possession. That’s the number one rule: Only the owner, their transition team and possibly one critical team member should know about it until after the transaction is complete.
Prematurely revealing this information can have several adverse results:
- Early departure: Hearing about a pending sale can cause fear and uncertainty. Employees often assume the business is for sale because it’s failing, or they worry that they’ll be let go by the new owner. They may leave before the sale is finalized, hurting the company’s value.
- Legal challenges: The seller must certify to the buyer that the staff is in good standing. Early departures could make this look like a misrepresentation, and the buyer could sue, try to back out or otherwise undermine the transaction.
- Delayed transition: A strong, stable team can be a significant value driver. Buyers often write contingencies into the transaction to ensure key staff members stay. If there isn’t a strong team, the owner might need to stay on temporarily to facilitate the transition.
- Demand for compensation: Knowing their value in the deal, employees who learn of the sale might demand bonuses or raises as inducements to stay. Granting them can affect profitability and sale value, not to mention the discomfort of feeling like the deal is being held hostage.
Without adequate precautions, keeping your plan under wraps could be easier said than done.
Related: 7 Preparation Essentials for Selling a Business
Maintaining confidentiality
Your company may have such a well-cultivated grapevine that you sometimes feel you’re the last to hear your own personal news. Most breaches of confidentiality occur when owners try to handle everything themselves without professional guidance. Keep your in-the-know list small by recruiting a team of experienced advisors who will ensure discreetness and protect sensitive information about company operations, customers and employees.
Sometimes, you may have to inform a key employee about the sale early in the process — a top salesperson, the CEO or someone else. Do this as the last step of due diligence, and be sure it’s handled with strict confidentiality agreements.
What if someone finds out despite your best efforts? Your response depends on where you are in the sale process. If it’s early, you can say you’re exploring partnerships or considering offers without actively shopping the business. “Everything is for sale if the right offer comes along” is truthful but vague enough to quiet rumors. If those strategies don’t work, you may have to get transparent and insist they sign a non-disclosure agreement.
Announcing the sale
Once it’s final, communication should be strategic and focus on the positive. If you’ve handled the sale proactively, you should have no trouble presenting it as good news – because it will be good news:
You’re finally retiring and found the right person to continue your legacy. Other life changes are taking you in new directions, and the new owner understands the team and mission. The business is so successful it has attracted an owner who can take it to the next level.
Start by informing the management team first. Provide talking points to help their teams navigate the transition. Then, have a full team meeting with both the seller and the buyer present. Celebrate the event, express gratitude to your staff—they’re the ones whose work attracted the perfect buyer—and highlight the opportunities that the new owner brings. For smaller companies, individual meetings with each employee can address personal concerns and questions.
One of the first questions will be whether the new owner will let people go or make other significant changes. This shouldn’t be a concern unless you’re a large company or corporation. Contrary to popular belief, employees are rarely let go in small to mid-sized business sales. Buyers typically want to retain the staff because they are integral to the business’s success. The goal is to maintain a stable and strong team post-sale.
Related: I Specialize in Exit Planning — You Need to Make These 5 Moves Before Selling Your Business
Training and transition
The seller usually trains the buyer in business operations. This transition period can last up to a year, depending on the complexity of the business. Employees can see this as an opportunity to demonstrate their value to the new owners.
New owners should avoid making significant changes for the first six months. Stability helps employees adjust to the new ownership without additional stress. Small, positive changes, like new benefits, can help build trust.
At least during the transition, an open-door policy is essential. It allows employees to voice concerns and feel heard, which builds trust and can prevent minor issues from escalating into major problems.
Believe in your team
People are one of the top value drivers in a small-to-mid-sized organization, and this holds true in a sale. Building a solid team and demonstrating their value through proper documentation and reporting can significantly enhance your business’s value. Planning and managing the transition carefully ensures a smoother process and preserves the company’s integrity and performance.
Thoughtful preparation, strategic communication and professional guidance are the keys to successfully supporting staff when exiting a business.
