Planning to Sell Your Business? - Know How to Manage Your Business during the Sale Process
It happens more often than you might imagine - a business buyer comes back to the table after a deal has been negotiated to ask for concessions due to the declining financial performance of your business in the final months prior to the closing transaction. It is not uncommon for a deal to completely fall through if the financial results fail to meet the expectations of the buyer. Often, the primary cause of negative turnarounds during the sale process is the performance of the management team, which has focused its attention on the deal rather than the business.
Business sellers should ensure their business is being run as if they are not going to sell it. As part of the sale strategy, they should establish clear assignments and objectives for the management staff. Some may be involved in the sale strategy, but others must be responsible for managing the business and held accountable as if it was not going to be sold - because it might not. Ensuring your business is running optimally and meeting forecasts during this critical period are all the more reasons to have an experienced advisory team and plan in place.
How do I maintain confidentiality throughout the process?
Of all of the things that can go wrong in the selling process, the inadvertent leak of information can be the most damaging. In this day and age, information travels at digital speed, and it wouldn’t take long for it to reach employees, customers, or the market, any of which could derail the plan and possibly impact the value of the business in any future sale. In most cases, information is leaked by the business owners themselves through a family member, an advisor, a colleague, or anyone to whom the business owner might drop even the slightest hint.
The most essential rule of thumb for business sellers is to never tell anybody who doesn’t need to know; and when the need to divulge any aspect of the idea or plan to anyone arises it shouldn’t be done unless a non-disclosure agreement has been signed.
How and when should I communicate my plan to my employees?
Perhaps the most challenging aspect of selling a business is determining the best time to communicate the plan to key employees, and, ultimately, to all employees. The timing is critical to the structuring of a favorable deal, and it can have a significant impact in the transition phase. Business owners who decide not to tell their employees until the last possible moment, risk information leaks that can cause anxiety among employees. This could result in decreased productivity, or even defections, which can derail negotiations.
The question of when to communicate the sale of the business to employees and management comes down to their absolute need to know and timing, both of which are entirely dependent on the circumstances. However, the question must be asked as early on in the process as possible.