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The Value of a “Stay Bonus” in Business Sales

Stay bonus in Business Sales

When selling a business, maintaining confidentiality is paramount. But what if essential employees need to be in the loop before finalizing the sale? This is where the concept of stay bonuses comes into play. By offering a stay bonus, you can ensure that key employees not only remain with the company but actively support and facilitate the sale process.

How substantial should this bonus be? While there’s no fixed standard, we’ve observed bonuses ranging from 20% to even exceeding 100% of an employee’s annual salary. However, it’s not just the bonus amount that’s significant. Like in most transactions where terms can be more crucial than the overall value, the schedule of payment is vital. A typical distribution might involve disbursing around 50% of the bonus upon closing the sale, with the balance paid out in subsequent milestones, like the six-month or one-year mark.

Such an approach offers dual advantages: For buyers, it provides heightened confidence that the existing management team will remain in place, ensuring business continuity. For the employees, it acts as an appealing incentive to stay on and contribute positively to the transition.

In essence, by incorporating a stay bonus, you enhance the attractiveness of your business for potential buyers by reducing perceived risks. This not only aids in a smoother sale process but also reinforces the commitment and value of your key employees.