The Hardest Question: When and How to Tell My Employees?
You have owned your business for 30 or 40 years and you’ve finally decided that you are going to sell it with a plan to retire. So often, the thing business owners who are in this position dread most is how and when to tell their employees. They know it is going to be a shock them. There will be tears, disappointment and maybe even anger.
When should you tell your employees about this vital decision? There are no easy answers, but here are some things you might want to consider.
- Your employees will probably not be surprised. The joke is “You are 97 years old! Of course you are selling your business.” Even if you are only in your 50’s or 60’s, people know. They can tell it by your body language, by your behavior. You’ve given them subtle clues. It is seldom a surprise.
- When and if you do tell them, many will be relieved to know for sure. Uncertainty is the worst thing and they’ve suspected your exit for some time. Finally knowing will be a relief.
- If you do tell them, when should you do it? The rule of thumb is that it takes about a year to sell a company – 90 days to prepare it for sale, 6 months to market it and 90 days to close it. If you do decide to tell them, the end of the 90 day preparation period might be an appropriate moment. There will have been some bustling about preparing the company for sale but just as the marketing program begins, and the world is finding out on a “blind” basis, would be a good time to inform them.
- The first people to tell should be your executive team. It is important to tell them that you have hired a professional team and that everything will proceed in an orderly manner. As buyer visits begin, it might also be helpful to bring more people “into the tent” and spread the work even further.
- Are there risks in telling your people? Yessiree!
- Confidentiality. As you tell your people you will emphasize the enormity of the task in front of you and you will ask them for their cooperation. Keeping it confidential is part of the process and you are counting on them not to betray your trust. You would like to keep the fact you are selling your business under wraps for as long as possible. There is always a chance it will leak.
- Resignations. “Selling your business, are you? Time to pack up and leave.” This is possible. You might consider a “retention bonus” to keep them or a bonus at the close of the deal.
- Fear. People will be nervous and afraid of losing their job under new ownership. Your response should be that there are no guarantees in life but it is very unlikely that a buyer would be interested in dismissing the very people who helped build the company to what it is. Also, you can assure them that you’re going to make the retention of current staff an important part of the negotiations with the buyer.
- Insubordination. Somebody who has it in for you could use this as an opportunity to do what they can to sabotage the deal. This is possible but as long as you have solid relationships with your people, it is not very probable.
- Are there risks in not telling your people? Definitely!
- Relationships. It could be terribly offensive to some people who have worked for you for decades to have this happening under their noses without hearing about it directly from you. You could lose important friendships and loyalty.
- Cooperation. If it’s kept a secret you lose the advantage of involving your best people in the process. Buyers are interested in management just as much or more than anything else – particularly if you ae leaving shortly after the close. Not being able to show them off could be a serious detriment.
- Stealth. Having the buyers come in after hours or during working hours pretending they are somebody else could be a disadvantage in getting the best deal for your business. It could make the visits far less effective.
- Exhaustion. Having this secret hanging over your head can be demoralizing and exhausting. It can be a terrible burden for an extended period of time.
As I said before, this is a tough one and there are no absolute right and wrong answers. My advice is to gradually bring your employees into the process by telling them what’s going on. Hearing the news is usually a relief to everybody and you will quickly sort out who might not be worthy of keeping on until the deal closes.
Many thoughtful and experienced people disagree. They think that the fewer people who know for as long as you can keep it secret, the better.
What if your plans should leak to customers and/or vendors? That is really the bottom line risk. First, you assure those who find out that they shouldn’t worry. You are working hard to make the transition as seamless as possible. Then, you may very well discover that they envy you and can’t wait until they can sell their businesses too.
Companies change hands every day. It is a natural and oft-repeated exit for business owners approaching a certain age. As momentous as the event is for you personally, life will go on and the earth will continue to rotate. Customers and vendors see it all the time. Deciding who and when to tell is only one of a myriad number of decisions you will have to make. All this is intended to do is to add a few more data points to your deliberative process.