The process of selling a business can be an anxious time in an owner’s life. It will involve steps like preparing an exit strategy, hiring a business broker, meeting with potential buyers, negotiating a deal, and often an extensive amount of due diligence. However, one of the most stress inducing parts of this process for owners is disclosing the sale to their employees.
Typically, the best time to tell your employees that you are selling your company is after a business purchase letter of intent has been signed. Ultimately though it is going to come down to when it feels right to you and the needs of your employees. There are a lot of people’s livelihoods tied up in this deal and it can be hard to let people know things are about to change. But, if you do the necessary work to ensure your staff is taken care of and placed in a position to succeed everything should work out just fine.
At the end of this I hope to give you a comprehensive answer to the question of “How to tell employees you are selling the business?” and provide some insight into what I have experienced.
Determine Your Process
When you decide to sell your business you should expect to have a lengthy to-do list. There are preparations that need to happen, financials to organize and present, agreements to negotiate, and even your own emotions to process; all of which require your attention and planning to ensure the deal closes smoothly. In this mix of paperwork and conversations it is important to remember your employees.
When are you going to tell them you are selling the business? And how exactly are you going to do it?
Circumstances are about to change for more people than yourself. Respect that by being as clear and open about the transition as is possible within the structure of the deal. I recommend going into this process with a plan or strategy for how you are going to share this information with your employees. The paragraphs below will shed light on important considerations, how much to share, when to tell, and how to tell them.
When To Tell Employees You Are Selling The Business?
There are definitely best practices when telling your employees, but, if you’ve read some of our other articles you know that each business is its own individual entity. With that comes a unique set of circumstances with which I have to work and advise under. When working with a business broker make sure that they look at your employee structure and determine any problem areas before moving forward with telling your staff.
Keep It Confidential Until The Deal Is Finalized
It is almost always a good idea to wait to tell employees until the deal is done. This keeps the spread of information within your control and allows you to focus on what needs to happen for you to successfully sell your business. Information in the workplace can sometimes feel like an old school game of telephone, with each person having a different version of the same event. This is exactly why I recommend telling employees later rather than sooner, so as to prevent side conversations throughout the company.
The narrative is important for both you and the buyer, so make sure you maintain control of the conversation. A simple and understandable exit to retire in Florida can quickly turn into gossip about the business failing if you don’t take charge of the process.
The Risks Of Telling Them Early
Disclosing information before the deal is finalized could jeopardize almost every aspect of your deal. Like I mentioned above, word spreads fast. In a matter of days a few employees knowing that you’re selling can lead to the entire staff and potentially even clients. It is of paramount importance that your clients find out about any changes within your business in a professional and organized manner. You do not want to risk relationships with your clients during the process of evaluating your business.
Your employees themselves are likely a large contributor to the value of your business. If the deal is discovered too early, employees will obviously have questions and could easily become anxious about their job security. The last thing you want to do during this time is create panic and instability throughout your company. Losing crucial members of your team can make it more difficult to find a buyer for your business or prevent a deal from closing.
The result of any of the above scenarios is a lower valuation for your business. To prevent any of this from happening, I advise that you wait to tell employees that you are selling until the deal is finalized. There are other options of course and key staff may need to know ahead of time, but as a general rule wait until you are certain.
Can You Tell Them Upfront?
At the end of the day this is your business, so you get to decide when to tell employees you’re selling. If you don’t like the idea of keeping secrets from your staff, there is the option to tell them upfront. That level of disclosure is not recommended but there could be some benefits.
The main advantage of telling employees upfront is transparency. You can remove some of the stress out of the process by eliminating the need for complete confidentiality. As the business owner you don’t have to worry about hiding information from employees and your team of professionals can now operate freely without having to worry about the spread of information. When a potential buyer visits, they can meet the employees and discuss their intentions to purchase the business.
If transparency is important to you then maybe this is something you consider. As for any other benefit attained by telling employees upfront about your intentions to sell, I simply don’t see value. A good business will attract a significant amount of attention from investors on its own. Which is why I recommend following the traditional path of disclosing this information to employees. However, I would be remiss if I didn’t disclose all of your possible options.
How To Tell Employees You Are Selling?
When it comes to telling your employees that you are selling the business, timing is everything. However, a simple google search will reveal industry standards. What most business owners are looking for is the answer to “How to tell them?”. There is a large human component to all of this that can’t go unnoticed.
Yes this is your business, but much more is involved. Your employees identify with your company and their livelihoods revolve around it, which is why knowing how to tell them you are selling is so important. Not just for the success of your deal but also for the best interest of the employees themselves.
Tell Key Staff First
Your employees should not all find out about the deal at the same time. You want to first make sure that all your senior staff know about your plans. It is important to make them feel valued and involved, maintaining trust with them will help ensure the success of your business after you exit.
You want these employees to buy in to your vision and the new company trajectory. Consider including them in discussions to help build confidence in how they are viewed within the company structure. These employees will be developing close relationships with the new owners, but this only happens if they stay. Like I mentioned above, uncertainty can lead to some employees leaving for other opportunities. These key employees are necessary and add value to your business, losing them could jeopardize your ability to sell.
Be Clear And Open In Your Communication
When it comes to telling your staff as a whole, I recommend having a plan and being as clear and open with information as possible. This is a big deal to a lot of people so give it the attention it deserves by having a well thought out process. Most of you reading this are small business owners who can tell everyone on your payroll by calling a meeting in the conference room, but for some, you may have a larger operation, remote employees, or contractors who would need to be notified via phone or email. This and many more things need to be considered when you start to transition ownership.
Exactly what you say to them when the time comes doesn’t exactly matter, so long as it’s compassionate to the changes they will experience. Be clear and try to follow an order to disclosing the information. Start out with telling them your reason for selling. Next, talk about the buyer and the qualifications they are bringing to the company. You want to reassure them that you did your due diligence and picked someone who is capable of continuing to operate the business.
If possible, consider introducing the buyer soon after you have this conversation with your employees. It is important for the new owner to start to develop relationships with the staff and work to reaffirm everything that you have told them. Take the focus off of yourself and the changes happening within the business and make it about the plans for the future. Your staff is going to have to buy in to where things are going to make this a smooth transition.
Make sure you touch on the three things below when telling your staff you are selling. They will likely have more questions, but that’s to be expected. This is a transition not an immediate change, just make sure you cover what is necessary to ease everyone’s nerves in the first conversation.
- Reason – You can be as open here as you would like, it is your life and some reasons may be personal. What is important is that your employees can identify a reason. People always want to know why and if you get ahead of things by answering that for them you will prevent rumors from starting.
- Time – Take away the unknown by establishing a clear timeline with your employees. You can help ease anxiety and fear by letting your staff know when everything is happening.
- How will it affect them? – Make sure you answer this question for your employees as soon as you disclose your intentions to sell the business. They want to know what is going to change and how their day to day work life is going to be affected.
Conclusion: How To Tell Employees You Are Selling The Business
How do you tell employees that you are selling the business?
The answer to that is up to you, just remember to protect the deal and be transparent when the time comes. It is a difficult conversation to have on a lot of levels, people have put their time into building this business and relationships have been made. Throughout the lifecycle of a business the need to sell often arises at some point, and when it does you need to make sure that you are prepared.
Have a strategy for both when and how you are going to tell employees. If you are able to follow through on that strategy in accordance with your team of professionals, everything will work out just fine.