Show me an engaged and committed manager, and I’ll show you someone with something important to do, something exciting to look forward to, and a reason to care about the business.
This doesn’t change when a business is being sold, but it does become more important.
Be honest with key managers when you’re selling your business. They’ll appreciate your candor, and discussing your plans will provide an opportunity to communicate around these three issues.
Give Them a Role
Allowing trusted managers to help buyers perform due diligence can go a long way toward easing anxieties. So can giving key managers additional, meaningful responsibilities for which they are prepared — and this may help you to find more time to devote to the sale.
Recognition and inclusion can provide managers with a motivating sense of ownership.
Give Them Something to Look Forward To
Usually, there are reasons entrepreneurs align with particular investors. Maybe investors have a track record of growing businesses and allowing key managers to participate financially. Perhaps your investors are prepared to provide stay-on incentives for critical employees. Cultural fit can also be motivating to people who joined your business for reasons beyond compensation, benefits, and perks.
Whatever benefit your investors bring to the table, be sure to communicate it. Managers with something to look forward to will naturally be more engaged.
Give Them a Reason to Care
Usually, key managers are people who were engaged before the sale. So discuss with them the reasons they’ve remained committed. Help them understand why these reasons remain valid, even as the ownership equation is changing.
Is there something they can achieve from the sale? If so, uncover it and discuss what’s “in it” for them.
Managers with something to anticipate are more likely to remain engaged throughout the exit process.
Financial Strategies
Another strategy to consider — along with those described above — is for owners to offer stay-on incentives to key employees or groups. These are often reserved for the most vital managers or salespeople within an organization, and they can include incentives beyond financial ones.
Typically, though, stay-on incentives guarantee employees a lump-sum bonus or payout over time for staying on through the business transition or to a specified date beyond the transition.
Sellers can also ask buyers for assurances about keeping existing employees on; however, such agreements aren’t always available and less often guaranteed. Buyers eventually make their own judgments about the value of any particular manager or employee.
Elvisridge Capital seeks established, privately held, middle- to late-stage businesses based in the United States. We invest in situations where our experience and resources can help generate significant profitability improvement and revenue growth. To begin a conversation, contact us at info@elvisridgecapital.com.