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What Percentage Of Employees Leave After A Small Business Has Been Sold?

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Comments & Replies: 1     Views: 2507     Posted By: Craig Osterhoudt  



Topics: Buying A Business, Escrow Closing Issues, Selling A Business     Tags: buying a business, for sale by owner, selling a business



What percentage of employees normally leave when a new buyer takes over a business he has just bought?

I recently had a business opportunity for sale, and the seller was proud that he had a key employee who did most of the technical work of the business, and that the owner needed only to manage at a high level, doing some marketing, maintaining customer/vendor relationships and so forth. Most of the technical aspects of the business and day to day operations, were handled by a very competent and high quality employee.The seller saw this fact as a positive, and thought it justified a higher selling price for his business. However, the buyer saw this as a negative, and thought it justified a serious price discount, because if the employee left, not only would the businesses profitability be seriously impacted, the workload of the new owner would increase several fold, until a replacement could be found, if in fact a replacement could be found at all.

The buyer claimed that, in all the business transactions he had been involved in, almost always all key employees left shortly after the business sale was complete, and he always based his business buying decisions on the idea that all key employees leave. Most high level, high value employees probably have one or more standing offers from a competitor, vendor or customer that saw the high value they provide and tried to lure them away. Most of these employees are staying out of some sense of loyalty to the current owner and once that changes, they take one of the standing offers they have for more money, better benefits, favorable location or what have you.

In my experience, most employees usually stay, after a new buyer takes over, but my experience isn't vast enough to justify a large enough sample to make it statistically viable, so I ask you, the business buying and selling community, in your experience, do the majority of employees stay or leave when a buyer takes over a new business? What are some methods a buyer can use to gauge whether employees will stay or not?

I would like to hear from you in a comment above - please feel free to reply to my comment as well. Thanks!

Replies To This Comment
I find that after a business sells most of the employees stay. The main reason is because they are in the habit of their daily routine and it works with their other schedule of school, family obligations, etc. It is often important that to the buyer that the employees stay on. The only reason the employees might want to leave is if the new buyer wants to cut hours and drastically change schedules or if the employee is related to the seller than they will probably leave. I find that approximately 10% of employees leave when the seller leaves.

While selling the business, we in the business broker community advise all buyers to be discreet when looking at the business, but eventually when the business is sold, it becomes to necessary for the seller to tell his/her employees. Communication is extremely important, so that that employees do not get scared and start looking for other jobs.



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