You’re considering an EOT sale.
Perhaps you’re sure it’s universally great news, so want to tell everyone ASAP?
Or maybe you want to keep it secret until the deal’s done, as a wonderful surprise?
Both the above are dangerous!
Some people’s views on the EOT sale will directly impact whether it succeeds or not. Prioritise discussing with these people, well before the deal is signed.
Below is the order we’d suggest for talking to various relevant parties.
Spouse/significant other
Timeline – a year or more pre-sale
If you have a life partner, discuss your business sale idea with them first.
The business will have been an enormous part of your life for years, maybe even decades. It’ll therefore have been a huge part of their life too, even if they weren’t actively involved.
Selling will have a big impact on your personal finances too. Typically you’ll get big capital payments, but income will reduce.
Plus what will you do with your time? Often people don’t give much thought to this. Too much free time seems a lovely problem to have for those who are always busy. Sometimes the reality isn’t as much fun!
Your partner will know you better than anyone, so are a good person to discuss it with. Pros and cons, confidentially.
Professional advisers
Timeline – feasibility check 6+ months pre-sale
So you’ve established it’s a sensible move in terms of your life plans. Next step is to get formal input on whether you meet the criteria, and what it will involve.
Potentially you could do this before discussing with your partner. But if nothing else, professional adviser time is rarely free.
If you’re going to waste someone’s time talking through an option that never happens, your spouse’s time will be cheaper! Plus is discussing life goals with a partner ever time wasted?!
Check feasibility of an EOT sale early on. Minimises risk you tell the staff, then establish it’s not viable.
Management team
Timeline – ideally 6+ months pre-sale
The reality is staff aren’t all equal. Some are junior and, to be blunt, replaceable. Others may be at least as critical to the business success than you are. It’s vital those latter people are on board with your plans.
If they don’t like the idea, and/or can’t see benefit to them, they may move on. If a few senior people leave, the business can quickly fail.
You might think “not my problem” if staff leave after the deal is signed. With trade sales, there can be truth to that, it’s the buyer’s problem.
But with EOT sales, you’re often paid out of future profits, years after the paperwork’s signed. Hence if the business falls apart soon after sale, you’re the main one to lose!
Plus if you get your senior staff on board, it’s an easy “sell” to the rest of the team.
⚠️Warning⚠️
Don’t be surprised if they’re initially nervous rather than enthusiastic. Hopefully this will change as their understanding grows!
Most people fear change. Plus they likely won’t have even heard of an EOT, let alone know exactly what it means for them.
Even when they do understand, the upsides to them can be modest. A bit of profit share, typically small whilst you’re being paid off. Potentially this comes with additional responsibility, as they take more off your shoulders.
Some may have had naive ideas, eg that you’d gift the business to them personally.
Some may love the job because they love working for you. The idea of you leaving, and/or them being in charge might not appeal.
Other employees
Timeline – after management team, on or before sale date
If key staff are on board, it’s then safe to tell the rest of the team. The managers can help explain what it all means.
In practice junior employees won’t have any more responsibility than they currently do. Of course they also don’t have to put any money in (if you’re reading this, you’ll know this as obvious…but remember it may not be to your staff).
There really are no down sides for the rank and file employees, only upsides.
They’ll have a small amount of extra collective power. It can be worth stressing that “collective” part, minimise risk any juniors think an EOT means they can make huge decisions post sale!
They’ll also have a formal right to a share in profits. Exactly how much this will be will of course vary from company to company, year to year. But it’s an additional entitlement they don’t have pre EOT sale.
Customers
Timeline – after staff, perhaps within a week or two of sale date
Customers may call up asking what it means for them. Hence why it’s vital staff understand first, to avoid embarrassment!
Some customers may be nervous. Especially if they’re very happy with how things are pre EOT sale, and/or they work closely with the founder.
Generally there’s no reason customers should be concerned. Business culture and strategy typically change far less following an EOT sale than they do following other business sales.
The wider world
Timeline – after customers
Whilst there’s no compelling reason to tell anyone else, typically companies are proud of becoming EOT controlled.
It’s a progressive thing, and whilst it’s typically financially lucrative for the founder, it should enable the team to do well out of the business too, especially longer term.
Most businesses are happy to publicise their EOT sale. Most will view it positively, can even lead to additional customers.
It may help avoid confusion arising from publicly visible things. Eg some changes will be lodged with Companies House soon after the EOT sale. Eagle-eyed folk may spot these.
If they don’t know what’s happened, they may assume something more sinister than the reality. Hence it’s good to get your story out there promptly, to avoid others filling in the gaps awkwardly.
Formal assistance with the communications side
“You only get one chance to make a first impression”
If your initial announcement to any party goes down badly, it can be hard to turn things around.
Salad are a branding agency that transitioned to an EOT in 2021. Hence not only are they marketing gurus anyway, but when it comes to announcing the change to EOT, they’ve been there, done that.
If you want help getting the messaging just right, potentially with a rebrand to suit your evolving company, they’re well placed to help!
Summary
There are of course no laws/rules in terms of who you tell/when. The above suggestion is based mainly around how important the person’s views are to the deal. Brief version of our suggested order of telling people is:
- Life partner first. If they’re not on board, it’s probably not worth pursuing.
- Professional advisers next. Need to ensure it’s viable.
- Senior staff after that. It’ll be significant for them, so you really want them on board.
- Other staff next. Less of an impact/reliant on them.
- Customers follow. Some will contact you to query things/congratulate. Don’t want embarrassing situation that whoever picks up the phone is clueless!
- Wider world. Publicise it, most people will see it as a great thing!
Consider expert help to give the best chance the message is well received by all key parties.
If you are interested in finding out more about transitioning to an EOT, get in touch with us at Go EO to see how we can help.