Selling a business isn’t just valuing the real estate—the bricks and mortar—it’s also the value of intellectual property, systems and processes and the human talent of the operation. Humans run the business, whatever innovation is involved and most importantly, it’s humans who buy business, therefore the human talent involved in the day-to-day running of the “show” contributes greatly to the overall value of the organization.
75% of the organization’s value is human
It can be said that more than 75% of the organizational value is human. Imagine then purchasing a business, expecting to grow the operation and there is a mass exit of the very talent you are relying upon for the future of this company. As a purchaser, you’ve just lost a significant component of the return on investment and perhaps have elongated the expectation of your return by years as you have to begin from scratch talent acquisition and development.
Certified Exit Planning Advisor (CEPA)
As a Certified Exit Planning Advisor (CEPA), when it comes to a business changing hands, we specialize in successfully transitioning the employees from the seller to the purchasing owner. Being a benefit specialist positions us nicely for accomplishing this with effective communication.
Too often the seller gets overwhelmed with the legal framework of selling and avoids the critical communication that must take place with employees during this time period.
Remember, an exit is not an overnight transaction. It is usually a process of between three-to-five years in the making.
Without a proper communication plan, by the time the buyer takes over, company culture and employee moral may have deteriorated to the point that the new owners are walking into a mess. It is no wonder new owners expect to replace staff, as they have “picked up” that “something” is going down, but they don’t know what. Teams may become weary for their job security and decide to jump ship due to no one telling them any differently.
The cost of turnover is typically 2.5% of the employee’s salary being replaced
Having a plan while building the exit strategy that also involves employee communication will go far to retaining the leaders of the organization and add significant value to asking price.
· Tenured employees drive innovation because they understand the business they have invested their time to work for. They are invested in the corporate goals and motivated to stay ahead of the competition.
· These employees are essential for customer retention in turn. Many times, it is not just what the business has to offer that keeps customers coming back, but the people they buy from.
· Operational efficiency comes from a team that understands processes and procedures necessary for the day-to-day running of the shop.
· Reduced turnover of staff means the company is positioned to pivot and weather unexpected market fluctuations and challenges.
Investing in employees attracts buyers
Making your business braggable starts with the employees. Word of mouth continues to be the very best marketing tool of any organization and what a better place to start but with employees. What could be more attracted really than owning a company where employees want to work and innovate and be creative?
While building a “best-in-class” business for sale, don’t forget to include the benefit plan.
The Employee Communication Plan
Be transparent about exiting intentions. You haven’t hired stupid people, so don’t treat them as such. People know and expect owners to retire, and they can normally “sense” when something is amiss in the management and leadership teams.
Ask for feedback, well in advance, on how teams feel about potential transitions from one owner to another and what would be most important to them retention-wise to encourage them to stay. Knowing wins the battle.
Make the communication plan strategic. This involves measuring out what can be “revealed” to staff during the process and who will lead this and keep it on track. Include this intention in the early discussions with legal and the CEPA team.
Never forget what the employees need to be successful to get their job done. This means looking at the positions from the perspective of both a potential buyer and the customers, ensuring the systems and processes are in place for developing and managing human capital.
Tips to remember when considering your exit plan
- Incorporate employee and client experience into your strategic plan
- Use a team that is focused on employee and customer engagement
- Understand your employee and customer experience based on their feedback and needs
- Encourage leaders on your team to take initiative in the employee and customer journey
- Establish clear metrics to measure the success of your strategy
This is where we drive innovation in benefits. Let’s have a conversation. Give us a call.
Note: this was written without the aid of Artificial Intelligence (AI)
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
