2 Options for Dealing with Employees When Selling Your Business

By Lee Polevoi

2 min read

When it’s time to sell your business, one immediate concern should be how to address the issue with your employees. Business owners and experts are divided on the best approach to take. Some assert that you should be completely transparent from the outset. Others contend that knowing a sale is imminent may adversely affect morale and productivity. Here’s a look at both options.

Option 1: Keep people informed.

Revealing your plans to sell doesn’t mean you have to disclose everything about the process; the people who work for you don’t need a step-by-step description of what’s going on behind the scenes. Do explain the reasons behind your decision and what you aim to achieve with a successful sale. Manage employees’ expectations, too: Tell them you will provide more information when you’ve completed the transaction — and that, up to that point, they should disregard any rumors or gossip about a sale.

Do you plan to sell only to a buyer who commits to retaining your existing staff? If so, this information will certainly allay employees’ most immediate fears of dismissal. If this isn’t the case, you can emphasize that a consistently high level of performance will encourage the new owner to keep as much of the staff as possible.

If you aren’t comfortable telling the whole staff, you might also share your intentions with a select few of your most trusted employees. These should be individuals who understand the compelling reasons you have for keeping things quiet during the delicate sales process and who would appreciate your willingness to confide in them.

Option 2: Keep things quiet.

News of a possible sale can spark confusion and anxiety (or even a mass desertion) among staffers, and recognizing this is a powerful argument for remaining silent until a sale is finalized. Considering the buyer’s need to secure financing, to ensure that all contingencies are covered, and to get escrow, leasing, and other arrangements in order, it’s often best to maintain a “business as usual” approach with employees.

Another compelling reason not to disclose: Employees with advance knowledge of a sale may tell customers about it. Apprehension about changes in the quality of your offering or customer service may trigger flight to the competition when you least want this to happen.

What if, despite your best efforts, word of a proposed sale gets out? It’s best to confront it head-on, because denials and cover-ups have a poor track record of success. Call a meeting to give employees the information they need; this isn’t a matter you should delegate to a subordinate or to convey in an impersonal email. Describe possible outcomes, including the likelihood of positions being eliminated and options for severance and job-placement assistance. If you’ve made a case to a potential new owner to keep people on, you can share that possibility, too.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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