Should you or should you not, tell your employees that you’re selling your business?

Losing a crucial employee can be costly to any business. Losses from the business elements that the employee is crucial for together with cost of recruitment and training of the new team member, could be measured in tens of thousands of dollars if not more. Not to mention the difficulty in explaining to buyers the sudden drop in profits due to this event and decrease in their confidence in sustainability of the future business (If the loss of one employee can cost a business so much how much will a change of ownership will cost?)

So reading the above, one could argue that there is no case to be made for telling the employees about the business sale. But lets look at this from the employee’s point of view. What they want is a good environment and income security. It is not the possible change of ownership that makes them nervous but it is the possible LOSS of their JOB that makes them nervous. They will start looking for a new job if they feel that their job security is being threatened.

So if you can assure your employees that they are necessary for the running of the business for the new owner as much as they are to you, this will reduce the chances of the loss of crucial staff through the process and you will also make the whole process much easier.

If your employees know that you are selling the business, you wont have to meet potential buyers in secrecy, the due diligence process will be so much easier, buyers will be able to talk to your employees and form a better judgment of your business.

One more point to consider, very often businesses do sell to management or employees so you never know maybe your buyer is your current employee. The only way to find out is to ask.

Zoran Sarabaca

Principal

Xcllusive

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Overpricing while selling your business can cost you a lot of money

 

Selling a business can take time so you need to make sure you attract and negotiate with suitable buyers from the start. If you don’t the process could blow out to years and result in you receiving less than market price.

Many business owners find it takes several years to sell their businesses and when they do the price is a lot less than their expectation and often less than the market value. How does this happen?

The first few weeks of selling your business are critical. Most buyers are monitoring the market and waiting for suitable businesses to become available. Your best buyers are the ones that show interest as soon as the business goes on the market. They are seeking to invest in businesses with sustainable incomes, with definable risks and good returns. They will be either speculative buyers looking for a bargain or more conservative buyers looking for a secure investment. They are sophisticated and unlikely to pay more than the market value of a business.

If you overprice your business you will first attract buyers who are looking at larger scale businesses. They will not see value in your business. At the same time you will not attract buyers who can afford the true value of your business because of the high advertised price.

Inevitably the business stays on the market with little interest being shown. You therefore drop the price to the true value of the business. Now buyers who can afford it will notice the business but will perceive it to be flawed because it has been on the market for a long time. This will prejudice them against buying it.

With no alternative you drop the price to less than market value to encourage interest. The property is now snapped up by bargain hunters.

At Xcllusive we recommend that when selling your business you need to demonstrate the value of your business to a potential investor and price it accordingly. This ensures you attract the right buyers at the right time and receive the true value of your business.  

 

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