The Better Question to Ask is “When to Tell Your Staff You’re Selling the Business?”
Selling your business is a momentous decision. In conversation with owners, we find they struggle with how the decision might affect their employees, since they consider their team like a family. But part of being a business owner is shouldering the responsibility of the company and having the foresight to understand how to manage repercussions from each decision. In this case, it is important to keep the sale of your business confidential and to know when the right time to tell your staff you're selling the business is not until after the closing has occurred. This will help you manage the story for sharing the sale with key employees and will make sure the sale process can stay on track until the sale is completed.
Confidentiality in a Business Sale
Confidentiality is a major part of the business sale process for a number of reasons, but mainly because a breach in confidentiality often has negative repercussions to the health of the company making it harder to complete a business transaction. This is why businesses are listed with blind advertising and buyers must sign non-disclosure agreements to learn more about a company beyond the blind ad. These protocols are in place to protect the sale of the company and by extension the business owner.
What Could Go Wrong if You Tell Employees You’re Selling Before the Deal is Finalized?
Consider this situation - you’re drinking your morning coffee, watching the latest news discussing a major corporation’s acquisition of a smaller supplier company - and during the discussion the anchors are highlighting the number of employees being let go because of the acquisition. This situation is the typical exposure people get to the mergers and acquisitions industry and business sales. When employers tell their employees about a future business sale, the employees begin to think their job is on the line and move on to work for another company. This is problematic in the business sale process, because the value of the company is tied to the number of employees employed and what they bring to the table. If employees leave, the financial situation of a business can change and this will affect the sale process.
The Ripple Effect With a Breach in Confidentiality
If you take this situation further, if employees know about the company being listed for sale in Colorado, they may tell more employees, vendors, customers, or even your landlord which can solidify further a negative effect on the company. Vendors and customers may seek out other businesses and a landlord could make it difficult to renew your lease, all of which will affect the financial wellness of your business. So, when planning to sell, we advise Denver business owners to wait to tell employees until the ownership transition is confirmed. This way the prior business owner and the new owner can share the sale together and help everyone understand the positive aspects of the company sale.
When Should You Tell Your Employees You’re Selling the Business?
The best time to tell your employees you’re selling the company is in concert with the new owner after all documentation is signed and the transfer of ownership is complete. Many business owners think the final step in exit planning is the closing, but it’s actually the transition period. This is when the sale of the company can become public knowledge. Often times, the previous owner will get the opportunity to introduce the new owner to all of the employees as well as any key customers or vendors that are integral to the business.
How Can a Business Broker Help You Through the Selling Process?
Running a business is a time intensive role, which is why working with a Denver business broker to sell your company is a great way to manage the process properly. Starting with the development of your executive summary - which we use to develop a pricing strategy (business valuation), a financial recast, and our blind advertising - a business broker is able to take the sale process of your plate.
The support of a business broker will also go a long way in making it simple to keep a sale confidential from employees and others. In Transworld’s case, we’ve built a process that’s been proven over more than 40 years that keeps confidentiality during each phase of a business sale. Examples of this include only listing the company under a blind advertisement, handling all buyer inquiries in our office, attorney approved non-disclosure agreements and providing a place to host meetings away from the business. Working with a professional business broker will help ensure word doesn’t get out before you’re ready for the ownership transition.
Selling a business is an exciting step for a business owner ready to tackle a new goal or enter retirement. And with intentional exit planning, a business sale can be kept confidential from employees until the optimal time to share the news arrives. To learn more about how to manage the transition process, we invite you to schedule a free consultation with a Denver business broker or visit our website today.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!