Selling your business is finicky. Your deal can fall through for any number of reasons. Some are obvious (it’s priced too high, the business can’t survive without you). Some are out of your control. And some are pitfalls that, if you engage your broker early enough, we can help you sidestep.
Below is a cautionary tale that comes directly from one or more real clients I have spoken to or worked with, challenges we have encountered when selling their business and suggested fixes for each.
Warning Your Staff That You’re Going to Sell
I took on a client in a very sellable industry. They were well established. Had loyal clients that would transfer to new ownership.
But a year prior to signing with me, the owner told his employees that he was going to retire at the end of the year and advised them to seek other jobs after the season.
Why did he do that? Because the owner was a good person who cared about their employees. They wanted to see their employees be able to continue to support their families. Dare I say; they wanted to make sure that their employees would continue to be happy.
As far as crimes go, this ain’t one. If anything, caring about their employees may be the top trait of a good boss. But, it limited our ability to market their business because now we were only looking at other established businesses in that industry that could handle the bandwidth.
Ideally, when we are looking to sell your business, we want to broaden the scope of buyers. And this move, with the best of intentions, mind you, drastically shrunk our buyer pool.
The Fix
Keep your staff intact. I tell business owners that this is your opportunity to be selfish after a lifetime of taking care of everyone – clients and employees. In fact, you should tell as few of your staff that you are considering selling as you possibly can.
The goal is to make your business as “move-in ready” as possible. And if your staff is still there, that continuity will help the incoming ownership:
- Relate to your customer base
- Maintain institutional knowledge
- Understand why previous decisions were made so that you can make more informed future decisions.
Now, new buyers will still be concerned about staff turnover. They always are. And we will have conversations regarding who are your key employees just like we will regarding who your key customers are. But, we have strategies we can coach them through if your staff is still in place. If they have moved on to take other jobs, we don’t have strategies to bring them back.
The outcome of the Deal
Sadly, the business did not sell. The owner had a nice pile of assets, and I believe they were able to sell them and make some money on their way into retirement. And they had saved enough with their partner that they were OK. Still, I would have liked to have been able to give them a nice check to take with them as they started their retirement.
In this instance, being a good person ended up costing the owner around two hundred thousand dollars.
