Why a Business Owner Might Not Tell Employees About a Sale and What It Means

Business owners often face a conundrum when it comes to communicating about potential sales of their companies. While it’s tempting to inform employees, there are valid reasons why owners might choose to keep this information confidential. In this article, we will explore scenarios where a business owner may not disclose that their company is for sale, and what this tells us about the business and its future.

Risks of Telling Employees

Telling employees that your business is up for sale can bring about several risks. One significant concern is the potential for employees to leave, especially if they suspect the business is on the market to competitors. Some employees might see this as an opportunity to seek better conditions or roles elsewhere. This can disrupt operations and potentially lead to a large turnover, which can be costly and distractionary for the business.

Another risk is that potential buyers for the business might gain insight into the company’s plans. Competitors may exploit this information, positioning themselves to “steal” customers or to avoid working with suppliers who may be concerned about the payment of invoices. Such knowledge can cause suppliers to delay or withhold services, leading to further disruptions. Spectators to the negotiations can also use the information to their advantage, potentially harming the business.

A Case Study in Unspoken Intentions

Consider a scenario where an employee was aware of the owner's ultimate goal of selling a subsidiary during a 6.5-year tenure. The employee learned this information much earlier than the rest of the team, making them privy to future plans. This pre-planning illustrates a common approach where the true intentions are known to only a select few. The business sold seven years after the employee left, and the owner received a text from the President saying 'It sold today,' thereby providing closure for the employee.

This example shows that knowing about a sale plan isn't inherently negative. The owner had a specific strategy to sell the subsidiary to free up capital, optimize cash flow, and manage risks. Unless you are a key stakeholder involved in such transactions, you might not be aware of these plans.

What “For Sale” Really Means

The phrase “For Sale by Owner” aptly describes this situation. It means that the business is for sale, but only to the right buyer. The business owner is not looking for any old buyer but rather one who understands the company’s value and is willing to pay a fair price. Similar to a real estate sale, the sale process follows specific procedures with the owner hoping to find the best buyer.

There are several reasons why the owner might choose not to disclose such information to employees:

Protecting Confidentiality: Revealing this information too early could disrupt operations and lead to unnecessary distractions for employees. Economic Incentives: Sharing this information could influence employees’ behavior, such as trying to negotiate better terms or making wrong moves due to rumors. Stability and Morale: Keeping the sale plans private ensures that employees focus on their work without overthinking potential changes.

Is This a Good Sign?

Knowing that a business is for sale doesn't automatically indicate poor company performance. On the contrary, it could signal that the business is in a good position to attract new investments or restructure operations. A change of ownership might bring fresh perspectives and new strategies, which can be beneficial for the long-term success of the business.

After the sale, you can expect some changes in staffing, but this is normal. New owners often bring in fresh talent and refine operations to enhance efficiency and profitability. This transition period is an opportunity for employees to prove their worth to the new ownership and contribute to the company's success.

Conclusion

Ultimately, a business owner’s decision to keep the sale plans secret from employees is a strategic choice. While it may carry risks, the benefits of maintaining focus and stability can outweigh them in many cases. Business owners should aim to communicate effectively when the time is right, ensuring both employees and stakeholders are prepared for any changes down the line.