By Richard Helling, The Principium Group
Breaking the news to your employees is one of the most difficult elements of selling your business. Many business owners wait until the very last minute to tell their employees, partly out of a concern for maintaining confidentiality and, often, due to dread of telling long-time employees.
There are many reasons for maintaining confidentiality in the business sale process. Business owners rightly worry that both employees and customers may leave or become disaffected. They also fear that competitors will take advantage of the situation. Issues with employees, customers or competitors can damage the business, reduce the likelihood of a sale actually being completed and damage the business even if a sale never takes place.
So how is the best way to handle telling your employees that you are selling your business?
In deciding when to tell employees about a pending sale, one thing to remember is that you do not have absolute control over confidentiality. The further into the process you go, the more people know about a transaction, including people associated somehow with your attorney, your CPA, your banker, etc. Unsuccessful potential buyers (or their advisors) may, intentionally or unintentionally violate a confidentiality agreement. Accordingly, we encourage business sellers to have a contingency plan for what they will say to their employees if word gets out about a pending sale. One way to address the subject is to state the obvious – that, based on your personal situation, that you have given some thought to selling, but that nothing is imminent.
The easiest and most direct thing that can be done to avoid this major pitfall is to be honest about what you are doing – as soon as it makes sense for you to do so. Of course, this is a topic you will also want to discuss with the buyer of your business. He or she will likely be very motivated to retain as many employees as possible and will likely want the opportunity to meet employees and address their concerns.
For an employee, few things are worse than getting blind-sided with news that could significantly alter their lives. Being forthright in a timely manner with your employees can help to control the rumor mill. Every owner should have a good understanding of each of his or her employees and be able to break the news at the proper time and in a manner that best fits the situation. This can take the form of a group meeting in a conference room or, if more appropriate, individual meetings with employees.
Another concern your employees may have is time. Once the employees have the full understanding of what is happening it is very important to give them as much time as possible. If the employees don’t want to stay on with the company, they will need time to find new employment. Considerations an employer may want to make can include flexible hours or even time off to look for a new job. Depending on the situation, a severance package could greatly help a valued employee have a chance to find employment and get back into a steady job.
The last important piece for consideration is to help employees who either leave or will lose their jobs under new ownership to find employment. Writing a letter of recommendation and being a reference that an employee can put on his or her resume can be extremely helpful. The green industry is a small world and simply picking up the phone and calling a colleague in the business on behalf of your former employee is another option. A phone call costs nothing, but can make a tremendous difference in the lives of everyone involved.
A little planning mixed with basic human consideration and compassion can alleviate many of the problems that often arise during the sale of a business. No plan can ever perfectly fit each individual case, but approaching your employees with respect and compassion is a great place to start.