How to Handle Employees When Selling Your Business

As a business owner, selling your business is usually cause for a celebration, or at least a giant sigh of relief. But for your employees, the picture is quite different.

At its best, imagining life after the sale is a murky nightmare for most employees. What’s worse, without proper planning and action, their nightmare can quickly become yours. Follow these six tips to make the transition smooth for everyone:

• Keep it quiet: The single most important thing to tell employees about a pending transaction is … nothing. You might think that your open-door, open-book corporate culture demands full disclosure, but don’t do it. Sale and merger transactions are far too volatile. Discussing anything less than a done deal will simply set off alarm bells for employees, and many of them will head to the exit. You have enough issues to deal with; employees defecting at the last minute will not only distract you from the task at hand but will likely scare off a buyer, too.
• Make them commit: A buyer will often require that a few key employees commit to staying with the new company for a period of time. In this case, keep the number of required people as small as possible, and then bring them into the discussion individually. As you discuss an employment contract with them, paint a rosy picture of the future and be sure that there is a nice financial incentive (bonus) paid to them for both signing and fulfilling the contract. Also, impress on them the need for silence about this deal until the official announcement is made.
• Remember the little guy: While there are certainly no rules about compensating every employee when you make your exit, remember that no business is built by one person. Sharing the wealth will not only help you sleep better at night, it will make things a whole lot easier if you ever have to come back into the company, or if you ever want to hire those people for your next venture.
• Negotiate everything: If the sale contract rewards you for continued strong financial performance, make sure your team will transition intact and on task. After a sale, however, a buyer is often interested in slashing costs, which can mean cutting salaries or staff. Plan in advance to trim unnecessary headcount before the sale, and make sure that the remaining staff is well cared for in your agreement. Sale contracts can stipulate anything you want, including staffing levels, salaries, and bonuses for those you’re leaving behind.
• Don’t go: One of the best ways to keep your team happy and in place is to set a personal example. Selling your company does not have to be the end of the line for you. Plan a six-month transition period after the sale during which there is little change. Be sure your people know that you are still in control of the day-to-day operations and that their jobs are safe. When you do step aside, do it quickly and decisively. Rumors and uncertainty are the enemy.
• Pile on the love: If you have avoided strong gestures of employee appreciation, it may be time to change course. Prior to a sale, the occasional team-building or off-site rally can keep things light and positive. Informal get-togethers are also great places to listen for rumors and to squash the scuttlebutt that can infect employee morale. Don’t let your preoccupation with the sale blind you to what the troops are saying.

In the end, every company ever sold has lost some employees. Some will go away mad, some will be fired, and some will take it as a personal insult. That’s life. As the business owner, your job is not to try to make every single person happy but rather to acknowledge the efforts that so many have made.

David Worrell is a lifelong serial entrepreneur who also coaches business owners on strategy and finance issues.