Telling Employees You Are Selling
Telling employees that you’re selling the business is an extremely delicate process. Break the news too early, and you run many risks. Wait to tell your employees, and you’re tasked with hiding information for the rest of the sale, which could take a year or longer. During that time there will be plenty of risks to confidentiality, such as showing a buyer around your business or leaving a confidential email open on your computer.
Judy Crockett, owner of retail management consulting firm Interactive Marketing & Communication in Manistee, Michigan, says disclosing your plans too early can increase the risk that vendors, clients and employees will get nervous and leave the company before the sale is complete. “If you let that cat out of the bag too early and an employee leaves or a vendor bails or a large account leaves, you’re going to jeopardize your sale,” she says.
The Risks of Telling Employees
Business owners have many emotional reasons for wanting to tell employees what is going on. They have strong feelings about these employees who have been with them for years and they tend to trust their employees. You may want to consider telling a few employees (more on that in a later article) but there are very solid reasons that support not telling your people about a potential sale:
- customers and vendors may perceive you selling as a sign that your business is failing
- competition may use this information as leverage to steal your customers
- employees worried about their job security, may start looking for other work
- you won’t be able to answer many of their questions. Faced with an information vacuum, your workers will fill the void with rumors or half-truths that can create panic should they trickle down to your customers.
- too much advance notice can trigger an exodus of employees. Not only can that cripple a new owner’s ability to operate the business, it often reduces the sale price and lengthens the amount of time it takes to attract prospective buyers.
Don’t Tell Them Until the Deal is Done
Hiding the sale from your employees is almost always the best option because it keeps information under your control. If the employees find out you’re selling, you lose control of the conversation. Before you know it, “I’m selling the business to spend more time with my family” turns into, “He’s selling because the business is failing” or “When she sells the business, we’ll all be replaced.”
But you might say, “I don’t want to lie to my employees.” Understandable and if asked you can say you are exploring a strategic relationship with another company. After all, an acquisition is a strategic relationship. Alternatively, you can use the tried and true “of course it’s for sale. Always has been and always will be!” Simple, direct and true.
Employees are usually one of a business’s most valuable assets for a buyer. In many cases, they need the employees more than the seller ever did. You need to protect this asset if you are going to realize the value they hold within the company.
Waiting to tell your employees protects them from their own anxiety and allows you to control the narrative of your sale. This will keep your deal on track and your business running smoothly.
Rank-and-file employees should be told once the acquirer’s check has cleared. Yes, it will ruffle some feathers. Yes, you may damage some relationships, but in the end, it’s simply the price of getting a deal done.
Keep an eye out for a follow-up to this article in which we’ll discuss when and how to tell key employees.