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Should Employees Be Informed I’m Selling?

Business Sales and M&A Specialists

The short answer: it depends.

For most Business Owners, the answer is almost always No, it’s a bad idea. This is even more true if your team is small in number and a very tight-knit group. There are a lot of ups and downs in selling a business…and it takes times.

However, here are two major reasons why NOT to inform them:

  • Will they leave? If you tell your employees that you’re going to be selling the company, they’ll understandably get nervous about their future and ‘who’ the new owner will be. They like you, how you run the business, and knowing that they are secure in their employment. Introducing uncertainty may cause unnecessary worries. The unknown factor of who the new owner will be, what changes is he/she going to make, will I be replaced, etc., might make them start looking for new jobs. This will diminish the value of your business and your own revenue stream if a key person leaves the company. This may put your deal and even your business in jeopardy.
  • Who will they tell? We strongly recommend that you do not tell many people that you are selling your business. If you tell your team, you can bet that they will go home and discuss it with their spouses and possibly even their friends. These people may discuss it with their friends and coworkers who tell their friends, and so on. It may get even back to clients or customers, who begin looking for a new company or suppliers who might start demanding COD. When a large number of people know and talk about a business, confidentiality is non-existent and it may kill your deal and decrease your revenue.

On the other hand, for business in which there is a strong management team who are critical to the on-going success of the business and the Buyer will not move forward without meeting the team, the answer is a qualified yes. This should not occur until the Buyer has completed Due Diligence, been approved by the landlord (if a lease is involved) and been fully approved for financing if needed. Ideally, this would occur shortly prior to the closing date in a management meeting/retreat. The Buyer and Seller should jointly convey that their jobs are secure and that confidentiality is critical.

Your Delta Business Advisor is here to help assist in creating the smoothest transition possible for all parties involved, especially employees. We’ll advise you on who to tell what and when. When you’re ready to sell your business, we’re here to help!