In almost every business listing, we add this sentence: “Owner is willing to stay short-term to ensure a smooth transition.” What does that mean for the seller, and why does it matter to a buyer?
Selling a business isn’t like turning off a light switch. The deal can close in a day, but the business is made up of people who have to make a transition to a new way of thinking and operating. That includes the person selling the business. How long and how involved the owner remains is based on the type of company you’ve built and the new owner’s situation.
Most agreements for the owner to stay on are very short term – 60 days or less (unless there’s a negotiated consulting agreement.) There are good reasons for the owner to stay on a few weeks after the sale. One is employee retention and productivity. If you’ve waited until the last minute to announce the sale and introduce the new owner (which we recommend), your staff may not have had time to adjust to the news.
Most employees dislike change, and fear of the unknown can be a productivity killer. Reassuring staff that you’ll be there the day after the sale can go a long way to easing their anxiety about all this sudden disruption. You can serve as a trusted advisor as they make the transition to new company policies and management staff.
Your customers may need the same reassurance. If you’ve been involved in the day-to-day operations of the business, staying on for a few weeks means that work-in-progress or almost-closed sales stay on track and customers remain confident that the company they signed on with is still the company they’re doing business with. That’s why the way you’ve structured your business matters so much. If you have a strong management team in place, your employees and customers won’t need nearly as much support and reassurance.
The buyer’s situation will also play an important part in why and how long you stay on. If the buyer already has a presence in the market or has a general manager they can send to take over operations, they may not need you for long. But it takes time to make the transition to a new company complete: policies, software, and even processes may be changing, and the seller can be the bridge between the old and new ways of doing business.
Don’t be surprised if you’re not needed for the full term you’ve negotiated. Once everyone gets comfortable, the new owner will be ready for you to move on so they can begin to make the company their own. You’ll also probably be more than ready to step away; it’s never easy watching someone make changes to the business you’ve built and nurtured for many years.
I’ve met some owners who balk at the idea of staying on without compensation after the business sells. But I always encourage them to reconsider. If you’ve received the asking price, this short-term arrangement just makes good business sense. Being available to the employees and the new owner is a way of making a last investment in the human capital of the company. It’s proof you want everyone to be as successful and happy as possible. It’s a show of good faith that will go a long way toward making the company you built endures and prospers.
There are times when the new owner isn’t looking for a complete buyout. He may request a portion of the sales price remain in the company, and the seller remains on to run the business. Most owners are selling because they are ready to move on, so this may not be the right deal for you. You’d have to be very clear on the terms of the agreement (and your tolerance level) since you’d still have the responsibility for running the business, but much less authority. Most owners would rather make a clean exit.
About the author: Patrick Lange
Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well-suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the President of the Business Brokers of Florida (North Florida District.)