When and How to Tell Your Employees About A Business Sale

Break the news too early, and your employees could become worried about job security and start looking for a job elsewhere. Wait too long, and you risk losing their trust, leaking confidential information, or falling victim to the rumor mill.

So, what's the right move?

There are many approaches to take, but at Trustmark. we recommend telling them after the sale is finalized. Some business owners prefer to share the news with key employees. Others prefer to break the news soonest possible to avoid rumor-mongering.

Here, we explore some scenarios and explain why telling your employees after the sale is finalized is the best option.

Approach 1: Wait Until the Deal Is Finalized

In most cases, it's best to keep the sale confidential until the deal is finalized.

Disclosing the information before the deal is closed can jeopardize the status of your employees and even risk your relationship with your clients. Customers and vendors may perceive your business as failing, and suppliers might even decline to extend credit for fear that you'll not pay.

Another important reason to keep the sale confidential is to prevent the information from reaching your competitors, who may, in turn, attempt to steal your customers.

Most importantly, keeping the sale confidential keeps your employees from worrying. If notified of the business sale, employees may feel their job is being threatened and start looking for opportunities elsewhere.

The last thing you want is to create a panic while still managing the daily operations of your business. Keep in mind that losing key members of your staff before the deal is finalized can affect the value of your business and make it difficult to find a suitable buyer.

The drawback? Keeping the sale confidential can erode the trust you've established with your employees. It can also create unhealthy rumors if not handled with care.

Tips for Keeping It Quiet

When selling your business, confidentiality is paramount.

However, keeping such a big secret can be a challenge, as there are many ways that information can get leaked. That said, there are things you can do to reduce that risk and ensure the sale remains confidential until the deal is finalized.

1. Establish Private Lines of Communication

Use personal email, postal service mailing address, and phone numbers for your business sales communications.

This can help avoid exposing confidential correspondence to your employees. Remember to hold meetings outside of business hours and not to leave any sales agreements or other pertinent documents in your office.

2. Confidentiality Agreements

At times, you may want to let in a few key employees. You'll want to ensure these employees understand the need for discretion and confidentiality. To that end, consider requesting them to sign a non-disclosure agreement (NDA).

3. Hire a Business Broker or Advisor

Hiring a professional business broker or advisor is critical to maintaining the confidentiality of the sale. Business brokers represent your business to potential buyers and ensure confidentiality in all communications.

From marketing your business to vetting buyers to conducting due diligence, a professional broker will work on your behalf and maintain confidentiality, allowing you to continue with your business while they handle every aspect of the sale.

Approach 2: Tell Key Employees

Although keeping it confidential is the best option, it may be necessary to reveal the information to key employees, who can help facilitate the sale.

This could be your CFO, operations manager, or anyone who oversees the daily operations. At times, the buyer may want to meet them to understand the business better and gain insights into what they can expect from the company.

In rare circumstances, the buyer may require information only your CFO can provide, so informing them might be a necessity.

Since buyers and lenders require a lot of information during the due diligence, letting in a few employees directly involved in the daily operations can help facilitate the process.

You'll want them to sign a confidentiality agreement or an NDA to prevent them from causing panic among other employees.

Approach 3: Keep All Employees in the Loop (Not Recommended)

It can be tempting to tell all employees your intention to sell the company before the deal is finalized. While this can help build trust and avoid unfounded rumors, it can negatively affect the sale and impact the employees' morale.

If there's a worst-case scenario, it would be telling your employees of the sale only to have the deal fall through. This can breed confusion and speculation about what's next after a botched sale. Employees will have many questions they might be afraid to ask, such as.

• Why did the sale fall through?
• Is there something wrong with the company?
• What will happen to us now? Will the business close down?
• Should we look for another job, or will things return to normal?

Lean on the side of confidentiality to avoid contending with these kinds of questions.

How to Tell Employees Once You’ve Closed the Deal

Now that you have sold the business and closed the deal, it's time to tell your employees.

But how do you do it?

The best way to inform your employees of the sale is to call a staff meeting and inform them of what has happened and why. You'll be speaking to a team that has made the business successful and built relationships with your clients.

Speak from your heart and let them know how much you appreciate the work and effort they've put into making the business a success. Inform them that only the management will change hands, and the business will continue to run as usual.

Most importantly, assure them that their jobs are secure and that they will continue working in their roles just as before.

In most cases, the owner is usually tied to the business for some period—typically months or even years after a sale. If you're in this situation:

• Let them know that you'll be around for a certain period to ensure a successful transition
• If you have signed a consulting agreement with the buyer, let the employees know that you'll also be working for the new owner

Selling a business is not like selling a property. You don't just hand over the keys and immediately move into your new home. Inform your employees they'll be seeing you for a certain period and that little should change in the coming weeks or months.

What to Say

You don't just break the news that you've sold the business. Be mindful of what you say and ensure your employees understand the rationale behind the sale and how it will impact their jobs. At the very least, be prepared to talk about:

Reasons for Selling

Explain why you sold the business. This may be obvious, but it can help address concerns employees might have about the motivations for selling.

What Will Likely Stay the Same

Explain what will likely stay the same after the business is sold. Share details about the business location, changing roles, client service model, and workflows.

Seniority

If a larger enterprise is acquiring the business, will the employees still retain their seniority? Who will they be reporting to? Make sure to share this information.

The Buyer

Your employees deserve to know details about the buyer, or rather, their new employer. Are they reputable in the industry? Will they uphold the company culture or introduce new policies? Do they recognize talent and hard work?

Benefits

It’s important to talk about all the benefits the company offers its employees and whether these will continue. 

Wrapping Up

Choosing when to tell your employees about your plans to sell the business is a personal decision. While I recommend telling them once the deal is finalized, it will all come down to what you deem best for your given situation.

-Excerpted from BizBuySell