Importance of Employee Retention and the Sale of Your Business

February 9, 2023 · 2 mins

Business owners know that key employees are integral to their business. Businesses rely on key employees to keep their business running smoothly, customers happy and suppliers satisfied. A common theme we hear from business owners exploring a sale is that they want to make sure that their employees are treated well by a new owner.

A key issue for many business owners in the post-COVID-19 world has been employee retention. There are more opportunities than ever for employees to make a change. This makes employee retention even more critical in any business and even more so if you are thinking of selling or in the process of selling your business.

On the flip side, buyers are hyper-concerned about whether or not the business’s employees will stay with the company through a transition. Buyers are troubled by employee turnover and will consider high turnover a risk if you are continuously replacing your top talent, ultimately decreasing your business’s overall value.

Business owners should get to know their employees to understand what motivates them. An owner’s first thought is often to increase salary, and while that can be a motivator for some employees; employers should consider the employees’ compensation package as well as other motivational impacts. We have considered these elements as key to employee retention:

  • Compensation Package – Employees view their compensation package as more than just their hourly pay or salary. However, it is important that your pay rates are at market levels. Things to consider other than salaries include; vacation time, flexible work schedules, health benefits, pension programs, bonuses tied to performance and where appropriate, minority interests.
  • Morale – How is your employee and corporate morale? Strong morale in the workplace is proven to increase productivity, employee satisfaction and retention.
  • Provide Feedback – Have your employees reached a new target or goal? Let them know now, don’t ignore it or wait until an annual review which could be months away. Many employees are more content in their workplace when they receive timely feedback about their work.
  • Wellness and Work Life Balance – This can be a combination of many items such as employee benefits, health benefits programs, vacation time, helping with gym membership fees, and providing professional development opportunities. Respecting your employees’ personal time can also lead to better productivity and employee satisfaction during their time in the office.

If you are selling your business that has a strong management team in place, the transition period to a new owner should be smoother and require less of your time post-closing. Business owners selling their business without key management in place are generally required to stay on longer with new owners, often upwards of 6 to 24 months.

Ultimately, employee retention is important at any stage of business. But for owners contemplating a sale, a strong record of retention can lead to a higher valuation and a faster transition period.

Trisha Mossey