Retaining Staff During a Business Sale
Losing key employees during the business sale process could both damage the business before the successful sale is finalised, or potentially stop the business sale from being completed. There are a few main reasons as to why staff leave a business when they hear it is for sale. These include:
- Job security – They fear that their job is no longer secure and that they will need to secure another as soon as possible to continue earnings and maintain stability
- Loyalty – They have a loyal relationship to the existing owner of the business and do not want to work for another employer
- Change – They’ve been wanting a change for some time, and figure this is the perfect catalyst
With the above points in mind, there are measures a seller can put in place to safeguard themselves and the buyer against reasons 1 and 2 above. Let us explain…
- Transparency – Staff will very quickly “sniff” out that the business is for sale. To prevent your staff fearing that their job is no longer secure, engage with them early on to let them know of your intentions and that they have nothing to worry about. Any buyer would always need the staff to remain and indeed staff retention may well be an important condition of the sale proceeding. Being transparent about the business sale and letting your team know before hearing about it from a third party is always a good idea, and the staff will respect you for that. Let your employees know they are appreciated and that their jobs are not at risk. This will alleviate any concerns and make them feel both valued and included.
- Contractual agreements and/or retention bonuses – Create reasons for your staff to continue their good work throughout the business sale process and into the future, by giving them an incentive to do so. A retention bonus gives them a percentage upon the successful business sale with the remainder to be given at a time in the future. E.g. 30% of their retention bonus is given upon settlement, with the remaining 70% given 12 months later. This incentivises their loyalty to the business and eases any doubts in the buyer’s mind that the staff may leave them high and dry.
It’s always wise to place yourself in the buyer’s shoes when analysing your business in preparation for sale. If something appears to be a risk or a weakness, address that issue immediately so that it doesn’t affect the buyer come sale time. A buyer will want the business to transition smoothly from the previous owner to themselves, with key staff remaining in place with as little disruption as possible. If there is a risk of disruption, this may be reflected in the sale price.
This is the business you built, ran and operated for years. Aim to work hand in hand with the buyer to ensure your business is successful for many years to come.
If you’d like to discuss your options and chat through your business sale journey, contact Core Business Brokers today, on (02) 9413 2977, or email Roy on [email protected]. We’ve got countless years of experience in Business Broking and will be more than happy to get you on the right foot on your business sale journey.
