When it comes to selling a business, one of the most critical factors that can significantly impact the business valuation and the overall sale process is staff retention.
The importance of retaining key employees during this transition cannot be overstated, here’s why:
1. Impact on Business Valuation
The value of a business is not just in its tangible assets but also in its human capital.
Experienced and senior management can add significant value to the business.
If key employees leave during the sale process, it can lead to a decrease in productivity, loss of business knowledge and expertise, and potentially a drop in the business’s overall value.
2. Concern for Potential Buyers
For potential buyers, the stability of the workforce is a major concern.
Buyers are not just purchasing the company’s assets, but also its workforce. If there’s a risk of key employees leaving after the sale, this can deter potential buyers or lead to a lower sale price.
In some cases, the lack of a succession plan might even result in the seller having to stay on in a contractual capacity for a period after the sale.
The Solution
So, how can you address this issue? The answer lies in implementing a long-term retention plan. Here’s how:
-
Compensation: One of the most effective ways to retain staff is through competitive compensation. Consider paying key employees about 20% above the current market rate. This not only incentivizes them to stay but also shows appreciation for their contribution to the company.
-
Long-term Retention Plan: A long-term retention plan can include various strategies such as equity incentives or performance plans. This not only motivates your employees to stay but also aligns their goals with the long-term success of the business.
-
Employee Satisfaction: Regularly track how satisfied your employees are. Consider conducting employee net promoter scores to gauge whether they would recommend your company to others. A satisfied employee is more likely to stay, contributing to the stability of the business.
-
Onboarding and Training: Ensure that the onboarding process sets new employees up for success. This not only helps in retaining them but also prepares potential successors who can take over key roles in the future.
Conclusion
In conclusion, staff retention plays a pivotal role in the successful sale of a business.
By implementing a long-term retention plan, you can ensure the stability of your workforce, thereby increasing the attractiveness of your business to potential buyers and potentially boosting its overall value.
