Insights

Selling a Small Business



"When should I tell my employees?"



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.