I'm getting ready to list my small manufacturing business in the next few months. The biggest things keeping me up at night are how to handle the employees and the building lease. I have 12 good people, some who've been here over a decade. The thought of them finding out through the grapevine is awful. Also, I have a commercial lease with three years left and a personal guarantee. How do I even begin to navigate this without everything falling apart?
selling process
Employees, leases and operations
The employee piece is tough. When I sold my service company, I told my key manager first, privately, and had him sign a simple confidentiality agreement. It gave him time to process. For the rest, we did a team meeting the day before the listing went live. It felt terrible but there's no perfect way.
Your personal guarantee on the lease is a major issue. Most buyers will want the landlord to release you completely as part of the deal. Have you talked to your landlord yet? Sometimes they are willing to renegotiate if it means a stable tenant stays in place.
I second talking to the landlord early. I waited too long and the buyer used my lease anxiety as a bargaining chip. Cost me a lot.
Thanks. I haven't approached the landlord yet, but that seems like a necessary first step. Tundrawalker, did your key manager stay through the sale?
He did. But honestly, I think that was partly luck. The new owner was willing to offer him a small retention bonus. That's not always the case. It's a gamble.
Keep in mind also that operations during the sale can affect the buyer's confidence. If you have any equipment that is borderline, consider getting it serviced or replaced now. A smooth-running operation is easier to hand over and makes the employee transition feel more secure.
Not sure if this helps but i've heard of deals where the seller gets a lease assignment with a 'reasonable consent' clause from the landlord. Basically you can pass the lease to the buyer if they have similar credit and use. Gives you some control without outright release.
That's true, but a personal guarantee often sticks around unless there's an explicit release. Check your exact lease language. Mine had a clause that kept me on the hook for the entire term unless the landlord signed off in writing.
I'm curious about the employee side too. How do you handle the question When they ask if their jobs are safe? Do you lie and say everything is fine? Or be brutally honest that you don't know?
Northpineguy, that's exactly my fear. I don't want to lie, but I also don't want to create panic. I've been thinking about a short script to ensure I'm consistent with everyone. Something along the lines of 'the business is exploring options for its future, and I will keep you informed when there is real news'. Still feels inadequate
I used used something similar. Most people appreciated the honesty that I couldn't promise anything. A few were upset anyway. That's unavoidable. What mattered most was that I didn't spring it on them at the last minute.
One thing I'd add is to keep operations steady. Don't let the sale Distract you from quality or customer service. Buyers look at trailing twelve months of financials. If there's a dip during the sale, it raises questions.
And to piggyback on that, if you have any long-term supply contracts, make sure they're transferable. That's an operational detail that can hang up a deal quickly.