Some areas of importance that should be considered when selling your business are those involving the key employees and “non-key” employees that work for you in your business. Sometimes business owners only focus on the past financial profits when considering the sale of their business. They should always remember that a purchaser will look beyond the numbers and want to review who works for the business. Remember the purchaser will be inheriting most of the employees – good and bad…. Consider the following:
- Are there any “problem employees” that a purchaser will not wish to hire?
- Will some of the employees become redundant and need to be let go?
- Are there key employees that a purchaser will be depending on after the sale takes place?
A private business owner needs to prepare well in advance of a sale when looking at an exit strategy. Problem employees should be dealt with and key employees should be locked in with employment contracts that include “non-compete” clauses. This will ensure that the business is attractive to multiple buyers and a purchaser will not be able to easily discount the selling price because of any potential severance costs associated with problem employees.
It is a good idea to always consult with a good employment/labour lawyer when looking at these issues. I came across an interesting article on “non-compete” clauses and the inability for them to be enforced in this good Financial Post article – http://business.financialpost.com/2013/12/10/too-long-non-compete-periods-risk-being-overturned-by-courts/. Check out the article, I think it just reinforces the notion that it is prudent to have a good lawyer drafting agreements for you.
Dealing with employees is just one of the items that reinforce the notion that it takes a long time to develop a good exit strategy if and when it comes time to retire from the business.
If you are a small business owner and would like to discuss your Estate and Succession plans, do not hesitate us to give us a call. It is never too early to start thinking about this type of planning, waiting too late can cost you money and may make it impossible to find a suitable buyer for your business.
