Here’s a story I hear a lot from small business owners. The owner is getting to be 60 or so and is tired of running all aspects of the business. After a couple of years of this, he thinks it’s time to explore selling his small, profitable business (average 50 employees, not a franchise). It’s still doing well but revenues have stalled for those last couple of years.* He is ready to move into the next phase of life—maybe that’s sales full-time (no more management headaches!) or traveling or teaching or all of the above! Soon after we start working together someone at the country club or one of his AMs says she’d heard the company was for sale and wants to know if it were true. The company hasn’t been put on the market yet (info being gathered) and no marketing information has been released to potential buyers. So how did this happen?
Owners often don’t know that their every move is watched by some of their employees. What’s his mood? How’s he feeling today? After that two years when the owner was less focused than usual about the business (which is noticed by the employees already), he compounds that by having different patterns of behavior. Long phone calls, missed regular meetings, focus elsewhere. His team notices. They begin to talk amongst themselves about what might be happening. Someone forms a hypothesis about the company being sold and VOILA! Everything that happens from that time forward is used to confirm the rumour. This is with no one officially saying a word!
How does an owner prevent this from happening? There are several tactics, but a recent client of ours provides an example of best practices:
- First, he never spoke about the sale when in the office or on a client site. He was known to have outside meetings with his CPA and other advisors and held every meeting on the topic off-campus.
- Second, we met with the owner, his assistant and his CPA (the core team) and we reviewed the process, the desired timing and the outcome. His assistant helped us anticipate who on staff might be questioning things so we could “pre-address” those concerns.
- Third, with their combined knowledge of their team members’ concerns, we developed a common script to respond to issues (a part of that included sharing that we were supporting the work to prepare an estate plan and updating the will and trust). Note that these were not lies!
- Fourth, no lies. No one wants to lie and listeners (especially employees) can tell if you or your inside team is lying (eventually). No need to do it!
- Fifth, we developed a communication plan that covered confidentiality. Our plan included the “script” and rollout for when and how to tell employees in phases as needed.
In some cases, continued employment and being “in the know” is sufficient incentive for employees to maintain confidentiality. In other companies, I’ve seen “Stay Bonuses” work for various or all employees and/or Employment Agreements for the most senior essential workers to provide 18-24 months (or longer) executive-level bonuses or deferred compensation with the new employer.
Keeping things confidential is difficult, especially in a company with less than 100 employees. Keeping the fact that you want to sell your company confidential is really difficult but it can be done, especially with thoughtful planning.
*unfortunately, this is too often the case. The time to begin exploring selling your business is when it is at its strongest, not when it has begun to stagnate or worse. Waiting until you feel compelled to sell will cost you!
If you would like to discuss your situation on a confidential basis, call Alison at 224-688-8838 or email me at [email protected]. We’re here to help you Harvest Your Potential.
