If you have decided to sell your business, the question of when to tell your employees you are selling likely looms large in your mind. This is an important question, and the answer will come as a relief to some and a stumbling block to others. Simply put, it is best to tell employees after the sale is finalized. Why? One word: confidentiality.
Confidentiality is Critical
Confidentiality is of the utmost importance when selling a business. Telling employees about the prospective sale of your business opens you up to all sorts of harmful disclosures, whether intentional or not.
Some employees may think they will help your efforts if they spread the word about your impending sale. However, the reality is that people often jump to negative conclusions when word spreads of an owner selling his or her business. Losing key clients or crucial members of your team because they question the stability of your company will be detrimental to the value of your business.
Prematurely disclosing your intention to sell can lead to panic within your organization and can hinder your relationship with your employees. Although keeping your employees in the dark about a prospective sale may sound counterintuitive in regard to maintaining your relationship with them, stirring up uncertainty about their status with you and their future with the organization is normally far more detrimental.
Telling employees about a prospective sale can lead to anguish and fear that turns out to be completely unnecessary if that sale does not reach closing. Protect your staff from the inherent uncertainty of the sales process by remembering that the deal is not done until the sale is closed.
Bottom line: lack of confidentiality can negatively impact the sale of your business, value of the business, and can even jeopardize a successful sale altogether.
Tips for Keeping it Quiet
Yes, confidentiality is paramount, but it is not likely that you will sell your business without telling anyone. It is important to consider who actually needs to be in the know and how to communicate with those key people.
Hire a Business Broker or Advisor
The number one reason to hire professional representation for the sale of your business is confidentiality. From marketing your business, to vetting prospective buyers, to managing due diligence, a professional business broker can work on your behalf, maintaining confidentiality and allowing you to continue running the business.
Establish Private Lines of Communication
Be sure to use a private, personal email address and phone number for your business sale communications. Exclusively using your personal email and cell phone to communicate with parties involved in the sale will help you avoid exposing confidential correspondence to your staff. Remember to hold meetings outside of business hours or outside of the office altogether to avoid raising questions or starting up the rumor mill.
You may need to involve a few key employees to help with the process of selling your business. Most likely these would be your accountant or perhaps a senior level manager. You will want to handle this delicately and ensure these employees understand the need for discretion and confidentiality. In this scenario, you may also want to consider requesting these key employees sign a business sale confidentiality agreement, or non-disclosure agreement (NDA).
How to go about telling your employees you are selling the business is a delicate process and will vary from business to business but should involve giving your employees confidence in the new owner. Remember, finding a buyer who will be a good fit for your business normally includes finding a buyer who is also a good fit for your staff.
Having an advisor makes all the difference through every point in the selling process, from finding a buyer to deciding when to tell employees you are selling. Our business advisors at Viking M&A are committed to your confidentiality and to the success of your business. Contact us today for a confidential, no-cost consultation.