The Pros and Cons of Telling Employees That the Business Is Being Sold

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In a free-enterprise economy, businesses of all sizes are bought and sold with regularity; it’s a perfectly natural occurrence in a dynamic business environment. Employees, however, don’t typically view the sale of the company for which they work as anything but “natural.” Their reaction is more likely to be stunned, confused and even angry. That leads to a dilemma that many business owners face, especially small-business owners: When should employees be told that a business is being sold?

According to one business broker, strict confidentiality is the best strategy. If customers, vendors and employees learn about the sale, then it is likely that many of them will assume the company is unstable, and that could easily jeopardize the sale. The broker also said that if employees were told early in the process, then some of them would certainly react by actively looking for new jobs. A number of them would naturally gravitate to the for-sale company’s competitors, and any confidentiality is then breached. The broker added that since only approximately 30% of all businesses for sale change hands, communicating the company’s intention to employees as soon as the decision has been made might not affect the outcome very much.

Many small business owners view their relationships with their employees as similar to a family, so owners often don’t want to cause too much shock if employees come to work one day to discover the “family” is being separated. This is why some owners think it is important to share their selling decision with employees quickly. This can be a positive if employers are well prepared for the announcement meeting. It’s important to tell employees that a new owner often has the capital and motivation to make the business an even bigger success. The data on small-business sales proves that most new owners want to keep employees because they are vital to a smooth transition and continued growth. Business owners can also prepare an announcement letter that thanks employees for their loyalty and lists the many benefits and advantages of a sale for employees.

There is no one strategy for addressing this delicate issue. When employees should be told that the company is being sold depends on the nature of the company’s business, who is buying it and the employer/employee relationship.

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