Selling your Business – Should you tell your employees

While many business owners feel the urge to be “honest” with their employees, especially the key ones. This is often a misguided impulse. Telling your employees early in the process only creates unnecessary anxiety for them. Even worse it can cause them to panic and seek other employment. Losing key employees prior to the closing of the deal can cause the deal to fall apart. Leaving you without a buyer and your business in chaos.

On occasion a business owner will decide to give their “key employee” an opportunity to purchase the business. This rarely works out. In sixteen years as a Business Broker, I have seen this work out successfully exactly once. Most employees are employees for a reason. They have neither the financial ability nor the risk tolerance to be a business owner. But when this does not come to fruition it can often lead to hurt feelings and the key employee leaving the business.

I suggest that you not look on this as keeping secrets from your employees and certainly not “lying” to them. Abstaining from informing them prematurely is in their best interests and yours. When the time is right you will make the introduction to the new owner and help guide them through the transition. In the vast majority of cases the buyer of your business will be determined to keep employees in place and will go to great lengths to ensure this happens.

One exception to be noted. This advice applies to small businesses. In middle market Mergers and Acquisitions the buyer will need to meet with key employees prior to closing. However even then this should be done as close to closing as possible and handled with utmost caution.

When selling your business, it is advisable to hire a professional Business Broker. We have the skills and experience to help guide you through the transaction.

Anthony John Rigney is a Board Certified Intermediary and owner/founder of Quorum Business Advisors a Florida based Business Brokerage and M&A Advisory.