Putting up the for sale sign on your HVAC business is no small feat. It is a significant undertaking to transition the ownership of your business and get your ducks in a row in preparation for the sale.
In most transactions, the seller is the only one in the company with knowledge of the sale. In addition to running the business, you are handling all of the due diligence requests. Some owners involve key team members to help them through this process since it can be complex and time-consuming. If you choose to preemptively reveal the sale to team members, here are some ways to keep them focused and incentivized so you don’t worry about losing valuable employees.
Prepare a Plan
It can be quite a challenge to keep your internal deal team members motivated and focused during such an uncertain and overwhelming time. Employees may panic and wonder about their fate once the sale is complete. However, the selling process of your business is not the time for employees to withdraw and hit you with untimely departures from pivotal roles.
If you neglect to acknowledge your team properly, affecting your deal team’s engagement, it can surely harm the sale price of your business or even kill your deal altogether. Remember the importance of motivating these people to support your sale, keep producing good work, and be involved in the process. How exactly do you do that?
This means you need a plan. Don’t underestimate the time and dedication needed to keep things organized while selling a business and motivating your employees to stay put and continue to do good work. Some integral players on your team will now be helping to prepare detailed operational and financial reports or any other materials needed for due diligence. You’ll potentially need help responding to requests from potential purchasers, integration planning, and transitioning the business post-sale. Of course, an HVAC business broker will also exponentially help with this process.
You should select who to be on your Mergers and Acquisitions team (M & A) as one of your very first steps in your HVAC business sale strategy, pretty much right at the point of acquiring an HVAC business valuation. You might first select your CFO, who will be a wonderful asset and resource, carrying most of the workload during this time. This might mean working after hours and coming in on weekends. Once you’ve decided who will take on the most additional work and be the most helpful to you, you can make other deal team members aware as you need their help.
Consider Implementing Employee Incentives
It’s difficult to motivate employees to stick around without offering some incentives. Otherwise, what is keeping them at your company? Nothing is certain, but incentives help to solidify your employees’ commitment and loyalty during the transition and minimize uncertainties for everyone. Which incentives to offer will depend on your personal business, employees, and the potential buyer. Incentives help employees feel valuable and give them protection and assurance. Ideas for incentives include:
1. A Completion Incentive
Completion incentives would mainly be for members of your deal team whose future employment is at risk. The basis of these incentives is the satisfactory completion of important tasks or a smooth ownership transition. These incentives could come in the form of compensating extra workloads and easing concerns about unemployment post-sale. Completion incentive amounts will vary depending on the size of your business and the team member’s role.
2. Change in Control
Change in control arrangements are essentially contracts that list pay and benefits that executives will receive if new ownership takes over. Often called “golden parachutes,” they provide protection and security to executives if new ownership forces them out of the company after the transition. The contract usually lists a certain period, like one to three years after a business sale. The severance amount could be as high as 50% to 200% of the employee’s total annual compensation and may also include continuation of benefits.
3. A Retention Incentive
Retention incentives are a targeted one-time payment bonus offered as an incentive to keep an integral employee from leaving the company. Retention incentives would be for employees who are essential and attractive to the new ownership of your company post-closing and ensure that the employee stays committed to the company throughout the sale. Retention incentives are payable on a date after your company’s transition is complete. If termination occurs at the company’s request, the retention money becomes payable immediately. Sometimes, there are additional contingencies, such as requiring the employee to fulfill certain duties first.
The Risk of Not Offering Incentives
Offering zero incentives to your employees during the sale process is risky and may negatively impact your sale. Hoping your employees will stay on board, shoulder additional work, and ignore their uncertainty about their future careers is probably not in your best interest. Thoughts and words are not enough. Incentives assure that you were looking out for your employees’ best interest and did all you could.
If you’re looking to sell your HVAC business soon, ensure you have a plan to incentivize pivotal players of your team to help with the sale and stick around. It takes a village to run a business, and you’ll need some of that village to sell it seamlessly at top dollar.