How to Sell Your Business, page 12

Keeping the Team Together, continued

The politics and personalities of each business differ, so you will have to use your best judgment to make the best plan for keeping the team together.

One thing you don’t want to do is to dilute current business efforts because of the distraction of selling the business. From this viewpoint, there are undoubtedly some employees who should not be made aware of the efforts to sell your business. Others will have to be. News travels fast in small business environments, so it is hard to keep secrets in any case. You will need help in performing many of the tasks that help dress a business successfully for sale.

Depending on your situation, you may need to create special incentives for key employees and/or those the new owners will regard as management. These might take several forms, including:

• An agreed upon bonus if the employee stays on for a specified amount of time, such as six months or a year.

• An equity stake in the business (providing participation in a successful sale).

• A success fee, payable when the business is sold.

If you do provide substantial incentives to your management team, as part of the quid pro quo be sure to get them to agree to sign non-compete deals with a new owner.

Employment Contracts

Small businesses are sometimes casual about the formalities of employment. Now is the time to fix this! Make sure all employees have signed a valid employment contract that is terminable at will. You don’t want the buyer to be able to argue that the lack of adequate employment agreements constitutes a potential business liability for severance (and other) obligations.

You probably know that some states have laws that may lead to employer liabilities even when there is an employment contract that specifies at-will termination. Get expert advice on this so that there are no surprises during contract negotiations.

Unlocking Hidden Assets

Now is the time to think carefully about whether your company has any hidden assets. The ideal scenario is that there are one or more non-core businesses that could be “separated” from the primary business—without diminishing the value of the primary business.

Continued next page

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