Every business owner dreams of having a star employee. Someone who’s skilled, reliable, loyal, and willing to go above and beyond anything you ask them to do. In fact, some lucky owners do have someone without whom the company might not run at all. That’s particularly true if the star employee is a top-level manager.
This is a good thing – until you’re thinking about selling or retiring. Then, that same superstar can become a red flag for potential buyers. Here’s why:
A key employee holds leverage in a deal they’re not privy to or involved in.
Talent is what a buyer is really purchasing, and if you rely too much on one worker, a buyer might see more risk than in a company with a strong team. I recently worked on selling a company that had a single employee bringing in over a million dollars in sales every year. More than a few buyers passed on the deal, thinking the business might not be sustainable if that employee left. All of them asked whether the superstar knew the company was for sale. When I told them no, most worried the news might require significant resources to smooth over, both in emotional energy and retention pay.
Many buyers will want to include the key employee early in the sale discussion, which puts the deal’s confidentiality at risk.
I understand the sentiment, but I always try to discourage notifying staff before closing. Even the most loyal employee might react negatively to uncertainty. The two or three weeks before the ownership transition give them time to worry about their future and the changes the new owner might make. If that employee is really great, they’ll have plenty of options in the market. They may decide to explore them, just in case. Putting out feelers with other companies (or talking about the sale with family and friends) can result in the news of the sale becoming common knowledge. Your competitors might take advantage, and your customers might consider moving their business elsewhere.
Remember that no sale is final until it’s final. Having a deal fall through is hard enough for the owner, but it could also create chaos for your employee if they know about it. Your goal as an owner is to keep productivity and operations as normal as possible during the deal. Keeping things quiet until everything is finalized is your best bet. When the new owner takes over, it’s on them to build connections with the staff and reassure them they’re in good hands. That’s easier when you’re the new boss, not just a possibility.
Your star employee might have been thinking about owning the company someday.
In fact, that might be some of what motivates them to perform so well. I recommend having a hypothetical discussion about selling the company well before you list it. “I’m thinking about retiring in the next year or two. Do you have any ambition to buy the company?”
The answer might be a firm no, in which case the conversation about selling has been started without any actual deal on the horizon. (Always remind them to maintain confidentiality until the sale becomes a real possibility.) They might like the idea until they realize they’ll be taking on millions of dollars in debt. Either way, they’ll have time to adjust to the possibility of change. And you will be the first to hint that it might happen, rather than risk them hearing rumors from other sources.
If your company’s success relies on a single employee, you should probably consider making changes. Investing in training and providing more opportunities might be the formula for creating more superstars on your team.
