Selling Your Business: How & When to Break it to Your Employees

Should you tell employees you are selling your business? The short answer is no, but the team at SOT Business Brokers Perth have put together some guidance on how and when to break it to your employees when selling your business.

If you are considering selling your business, you don’t need to immediately inform staff. In most cases, it is better to wait until a deal is signed before letting staff know. Too much advance notice comes with risk – it can trigger staff to leave if they feel their future is uncertain, your competitors may find out and your customers may start looking elsewhere. All these things can jeopardise a sale so you may be jumping the gun before a buyer is interested.
 

So as much as possible, it’s important to delay the announcement of the sale until the deal is in the final stage. You may need to bring a few key employees in on your plans to support in provide certain information for prospective buyers – for example financial records, marketing and product metrics. Consider an incentive if they personally help to close the deal. Stress to these employees that the sale is confidential and not to be discussed until you give them the all clear.
 

When it is time to tell employees that you are selling your business, address the positives of new ownership:

• A new owner will come with a fresh set of eyes and have new ideas about how to grow the business.
• A new owner will want to step in and continue to generate revenue without interruption. Staff are an integral part of making this happen.
• Will there be a transition period? If you are able to offer a handover period as a condition of sale, this will give the staff confidence in a smooth and easy transition.

If staff find out you are looking to sell without hearing from you first, it’s advisable to arrange a meeting face to face to discuss the plans and let them voice any concerns. Do it sooner rather than later before rumours take hold. If in the early stages, you can emphasize to staff that:

• You are weighing up your options to see where the market is at. The business may not sell immediately and could even take a year or two, depending how ‘hot’ the industry is.
• Staff are the lifeblood of a business and a new owner will need staff to continue business.
• A new owner will need to rely on staff for support to learn more about the business. This provides staff with an opportunity to show their leadership skills.
• It is business as usual, the business is not closing.
• It is important to keep the business in good shape to attract buyers.
• You will keep them informed if there are major developments which will affect them.
• They should keep the sale information confidential and not discuss it with suppliers, contractors or clients.
  
  Encourage questions. Be upbeat but compassionate. Imagine yourself in their shoes.

There a legalities involved with relation to staff and selling a business and you should seek independent advice on this. For example, if your employees are to be transferred with the business, some items to consider:

• Provide up to date employee records to the new owner.
• Notify the new owner of any contractual, leave, financial and legal obligations you have with your employees.
• Work out with the new owner what obligations you'll be responsible for and what obligations will be transferred to the new owner.
• Provide your employees with notice of ending employment and let them know that they'll need to sign a new contract with the new owner that will be effective from the date of the new ownership.