Human Resources Considerations When Selling Your Business

The sale of a business almost always has implications for the employees of that company. In extreme cases they will lose their jobs, while in others, they will have a new boss and new procedures to follow.

As a business owner, you won't always know what the future holds for your employees when you sell the business. Therefore, it is in your best interest to limit disclosure of an impending sale to only those people who are involved in the selling process. This can minimize the anxieties of your employees, who will likely be unsure about the prospect of their continued employment.

To successfully sell your business, you need to ensure that everything runs smoothly during the negotiations and through the transitional period. If the buyer plans to bring in a new staff, you will need to retain your current employees until the deal closes. One way to do this is with creative compensation packages that provide incentives for employees to stay on through the transitional period. Without such a plan in place, you run the risk of declining morale, decreased productivity, and the loss of employees — and customers. The result can be disastrous, because if the business stops running smoothly, the value will drop and the deal can be lost.

Stay-on bonuses are the most popular means of retaining employees. These bonuses can be paid out immediately or over time, and they can be structured in tiers. For example, staying through the closing could be one tier, and remaining on for a specified time after the deal is completed could be another tier. Such compensation packages can feature extended severance pays or a lump-sum bonus, depending on the specific situation. The goal is to make the package as attractive as possible in order to encourage employees to stay on through or past the closing. Since deals vary considerably, you or your human resources director will need to create such packages early on in the process. Then, in the course of negotiations, you will determine when to tell employees about the sale and implement a retention plan.

The earlier in the process you know the buyer’s staffing plans, the sooner you can determine what needs to be done. If, for example, the new owner anticipates that he or she will maintain your entire staff, then you may not need to implement an employee-retention plan. You may, however, provide some smaller bonus or incentive to assure that the quality of work does not decline, since employees will likely have concerns about the new owner.

If current and new employees are going to work together, you and the buyer might consider integrating the cultures of the two companies. You may want to offer some type of incentives for your employees to train new employees.

Before selling your company, prepare retirement benefit options, especially if you have senior executives or employees. The need for such packages, typically including medical coverage, will depend on the size and makeup of your company.

The key to successfully managing human resources through the sale of a business is taking the needs of all of your employees into consideration in advance and integrating them into the future plans.


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