With the multitude of factors that come into play when deciding the appropriate time to inform your employees that your business is for sale, I do not offer a standard or general answer. When sellers consult me as to my opinion on when it is the right time, I like to review the major issues that will affect the decision.
Seller makes the final call.
First of all, I feel it is the seller’s right and responsibility to make the final decision on when to make the announcement. It is still the current owner’s business and until the escrow has closed and the buyer takes possession, the owner faces the greatest immediate impact. They know the employees well, their insight as to how and when to make the announcement is paramount to putting together a successful plan.
Later rather than sooner.
Although some owners will think it better to be up front with the staff from the very beginning, this may not be the most prudent course of action. Remember, selling a business takes time. You may go to market and not have any serious prospective buyers for several months. Many things can happen in this time and getting your staff worked up over an ownership change when you just start the process of selling is not necessary. Don’t panic and jump the gun. Instead, think the decision through and wait for the appropriate time.
Wait for a solid deal.
I always caution sellers to wait at least until we have a “solid deal” in the works. Depending on the details of the offer, it may be time when you open escrow or it may be time when you receive a letter of commitment for financing the purchase. Every deal will differ, but you should review the situation with your broker. Just remember, a deal can fall out at any time (especially in the opening stages), so limit the chance of unnecessary stress on your people.
If your business has a key employee, one that most likely would need to stay on to assure a smooth and successful transfer of ownership, you may consider taking them into your confidence about the sale. Furthermore, you should consider discussing some type of employment contract to take effect after the sale. It may sound risky, but if they are truly necessary to the sale, it is better to find out now where they stand on staying after the sale, rather than having them leave or threaten to leave just before the deal closes. Many times the employment contract may include incentives such as a bonus (usually paid by the seller). This can bring a positive interest from the key employee on a financial level as well as psychological level. They will feel they are now included in the process, and will want to play a part in finding and assisting a qualified new owner.
Although the first concern of an employee may be “I am going to lose my job”, this does not typically occur. Smart buyers are aware that immediate or sweeping changes to a healthy business are often the worst thing new owners can do. Buyers will want the same people who helped build a successful business to stay on and continue doing a good job. As a general rule, employee’s jobs are secure in a small business sale.
Seller feels responsible
Many sellers dread telling their employees that they have decided to sell. They feel that they are letting the employees down, and they feel guilty having kept them in the dark about the sale. The reality is that this is a necessary step in selling. If you have done all the right things through the process (found a quality buyer, been up front and forward thinking about issues that could kill the deal, etc.) and the time is right, you should be ready to move forward. Your concerns are normal, but this is a part of selling. Be honest, direct and take the next step.
As a Broker, when it comes to deciding the appropriate time to tell the employees, I like to sit down with the owners and go over their major concerns (real and psychological). I help them to review all the options and weigh their respective outcomes. I also like to keep the buyer of the business involved in the discussion, they can do wonders to assist in the process and make their first step of business ownership a positive one for the employees. In this aspect of business sales, it pays to be strategic. Most of the time, if handled properly, things will work out well for all parties.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Bob Baumgarten, Business Broker: Orange, LA Counties
National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727.
|Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance
For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Ken Oppeltz, Business Broker, San Diego County
We have been San Diegos premier business broker and merger and acquisition specialist since 1989. Staffed with some of the best-qualified and most experienced business brokers in the industry, our professionals have all earned or are candidates for the Certified Business Intermediary (CBI).
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