Monday, January 7, 2019

Telling Your Employees

Telling your employees that they will be the new owners.
Once you have decided that selling your business to your employees is the best way to achieve your retirement goals, you will have to tell them. They may not necessarily be as open to the idea as you think. You know more than anybody that being a business owner is a big responsibility. In fact, this is one of two major reasons most employees are not already owners. Here are some of the considerations you will need to address.

The Timing
It is only natural that, once you have made the decision to sell to them, you also want to share it with them. That would probably be a mistake unless you are also ready to share it with everyone else as well. There are two primary reasons you want to hold off on telling them. First, they may get nervous and start looking for work elsewhere at a time when you need them the most to make your business as salable as possible. Second, they may tell their friends and family and sooner or later customers, competitors and vendors will know as well.

What to Tell Them
They are going to need assurance that what you are going to turn over to them is a healthy business that can not only continue to generate income for them, but also enough to pay off the financing they will need to buy it and that it will continue to do so into the future. In other words, you need to have a bullet proof business plan with solid projections several years ahead. Remember, they may be employees, but they are also buyers just like any other buyers and they will and should behave just like any other buyer. They will want to be treated the same way. Selling to employees is not a shortcut to retirement. You will still have to convince them that what you are selling has value just like any other buyer.

The Presentation
Because your employees are not yet owners, your presentation will need to be dramatically different from the one you would make to a more sophisticated buyer. It will need to be far more detailed and with lots of explanations of technical terms.

It is best to share the news with a few trusted employees first. The role of such a steering committee will be to share information with their colleagues, but also to learn what their concerns are. Allow enough time between meetings for the employees to become fully informed about and comfortable with what is about to happen. They will need to be convinced that their lives will be better, not worse.

Confidentiality
Even if you are prepared to share the news with the world, the employees as buyers will need to be furnished with all kinds of information about your company just like any other buyer would. The difference is that, unlike third-party buyers, employees are not used to handle such confidential information. Therefore, you will need to spend extra time explaining to them why it is important not to share what they learn with others and what could happen if they do. By all means, do collect confidentiality agreements, but realize that they may only be worth the value of the paper they are written on. This will just be the first of many new experiences for them to learn to think and act like business owners. You will be assuming the role of their teacher.


Complete Guide to Selling a Business, The

Many of the things you have to do when you sell a business are the same whether the business is small or not so small. One difference is that the stakes may be higher when you sell a large business, but even when you sell a small business, getting it right may be just as important. Your retirement or your family's well being may depend on it. You may not be comfortable going it alone, but the better informed you are about what to expect, the better. The Complete Guide to Selling a Business will give you that confidence.

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