Published April 06, 2011

When should I tell my employees?

By Scott Dickes

Every small business owner asks this question at some point during the sale of his or her small business. There are many reasons small business owners struggle with this decision:

– “If I tell them and the deal doesn’t close, I have caused a stir for no reason.”

– “My competition will use this to sell against me.”

– “If I don’t tell them, they will feel left out and betrayed.”

– “I am just so excited about working with Hadley Capital I can’t wait to tell everybody the good news!”

While every situation is unique, we generally recommend a two-step process to informing employees about the pending sale of a small business:

Step 1 Tell the senior management team immediately and communicate with them regularly. Consider including them in meetings, tours, and other initial discussions. You may be concerned that this news will trouble your senior managers, encouraging them to start looking for work elsewhere. Nevertheless, in our experience, the opposite is true. These trusted lieutenants know you are not going to stick around forever – whether due to age, health, or other interests like grandkids or lowering the golf handicap – and this uncertainty is more likely to get them concerned about job security. Telling them you want to work with Hadley Capital on an orderly sale and management transition gives them confidence in their opportunity for continued growth and success.

Step 2 An announcement to all employees is appropriate after due diligence is complete, legal documents are well on their way, and a closing date is on the books. Typically, this is around one to four weeks before closing. However, if employees are already talking and the rumor mill is running, then it is time to inform all employees as the rumors are usually worse than the truth: “Did you hear competitor X is buying us and shutting us down”…or…“We are being sold to a foreign company.”

The reality is that the truth is a positive message: “I am partnering with Hadley Capital to continue our great legacy, VP Smith is being promoted to run the company, we’re going to continue to expand, to hire, etc.” Controlling this positive message is more beneficial to everybody than uncontrolled and inaccurate rumors.

The sale of a small business is an emotional process and one that most small business owners only do once in a lifetime. Informing the employees of a small business about the pending sale of the business can be a concern for small business owners. Hopefully our two-step process provides a framework for considering when and how to inform employees.

Scott Dickes - General Partner

Scott founded Hadley Capital in 1998 with the objective of bringing a professional investment strategy to the small company market. Scott has spent the better part of two decades financing and growing small companies. It’s in his blood … he grew up visiting small companies on family vacations with his dad who was also a small company investor.

Scott works with Gillinder Glass, S&S, Custom Label, Harris Seeds, ISS, and W.C. Rouse, and was previously the chairman of the board of Packaging Specialists, JRI Industries and Kelatron, all former Hadley Capital companies.

He enjoys traveling with his family, flying (instrument rated pilot), rock climbing, golf, paddle tennis, and water skiing. Scott recently took up beekeeping as a hobby.

Scott is a Trustee of the Hadley School for the Blind (no affiliation). He holds a BA from Duke University and received his MBA from the Kellogg School of Management at Northwestern University. Scott and his wife have two teenage children.