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How do I ensure that I can keep employees when buying an existing business?

Hi... I've found a business that I am interested in, but my ability to run it is rather dependent on keeping the existing staff in place. Any advice on either steps I can take to keep the staff, or conditions that can be made in the purchase contract to help with this situation? Thanks.

Matt

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Answers (4)
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Dryer Law Company
President/CEO
Franklin County, OH

Matt,

I'll add one more perspective to the mix. If any of your employees are key salespeople with entrenched customer relationships, it is imperative for you to assess on the front end whether the seller has a strong noncompetition agreement with those employees and how you as the buyer will get the benefit of that noncompetition agreement (or, alternatively, enter into a new agreement with the employees). Your solution here will depend on state law concerning noncompete clauses as well as how your deal is structured (e.g., stock purchase v. asset purchase). My point is that, depending on the type of business and the historical sales channels, this could be a huge issue for you as the buyer.

Apr 2, 2009
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The BAF Group LLC
MD

In some circumstances, we encourage the Seller to provide financial incentives to keep key people. There is nothing to keep you from doing the same. (But don't be an AIG - pay the incentives AFTER they have worked the agreed amount of time!) The other thing is timing. Some of our Buyers want to settle on a Friday, swagger into the new business and say, "Hi! I'm your new boss!!!" Doing that when people are leaving for the weekend is a killer. They will spend their off hours talking about the horrible things that could happen, how they did not like the way you dressed, your hair - anything negative will be explored and exaggerated. Our approach is to settle on a Monday, walk in and roll up your sleeves, and work WITH those people. Get away from the back office for at least the first week, and do anything and everything you can to demonstrate that you need their input, that you are confident in them, and that your family is not sitting in a camper out back, waiting to come in and replace each and every one of the current staff. If you want to talk this over, call me. I have been part of Operations Management for takeovers and divestures for many years, and have worked everything from mom and pop franchises, to a division of a Fortune 500 Company.

Apr 2, 2009
Andrew Cagnetta
Transworld Business Brokers, LLC.
FL
Premium Broker

Treat them nice. Get them to buy into your plans and make changes slowly and keep the lines of communication open.

Mar 24, 2009
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VR Business Brokers/Vanguard Resource Gr
CA
Premium Broker

Your concern is shared with virtually every other buyer. Buyers are always concerned that the employees will leave after they purchase the business. What most buyers fail to consider is that the employees typically need their jobs and if they knew it was for sale, would be just as nervous that you will terminate them after the purchase. It has been my experience in over 600 transactions that employees seldom quit after a sale. That is unless your management style if completely different than the sellers. For example, if the seller is laid back and lets employees do whatever they way, and you are an aggressive type A personality, then you might have some reason for concern.

If you have a key employee that you absolutely cannot do without, consider some sort of bonus if they stay for at least six months following the sale.

Mar 19, 2009

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