Are you getting ready to sell your business? Well, to ensure a successful sale, it’s pivotal to ensure your Human Resources (HR) policies, processes, and practices are all in order, as this will play a significant role in fetching your desired price.
Your HR department is responsible for helping your prospective buyer know and understand the terms offered to your contractors and employees and comply with the obligations upon completion. Having your HR policies ready helps buyers:
● Comply with wage costs
● Anticipate restructuring considerations
● Assess the risk of employee-related liabilities
To help you get your ducks in a row and ensure your HR policies are ready when it comes to the time of the business sale, we’ve put together some essentials to help you get the best price.
Have the right HR policies in order
The first priority when getting your HR policies ready for potential buyers will be having the right policies in place. Typically, buyers will need to know how your business functions and that it will continue to function after the sale. The best way to analyse this is through HR’s perspective.
Having the right policies in place will also allow future buyers to know if your established HR customs and procedures won’t conflict too much with theirs.
Pro tip: Always document and write down HR policies and procedures before putting your business on the market. Everything from employee leave to termination needs to be captured in order to make the process as smooth as possible.
Ensure you’re compliant
Nobody wants to inherit a business that is non-compliant with laws, regulations, awards and agreements. It is your responsibility to ensure buyers won’t uncover any “surprises” in their due diligence.
It’s essential to audit your HR policies and practices before the business even considers going on the market, and you need to examine and pinpoint if and where exposures lie.
It goes without saying that should a potential buyer uncover any major breaches; it could jeopardise the deal and sink your potential earnings.
Understand your business’ HR liabilities
Who wouldn’t be concerned about HR liabilities? As per any sale, buyers (we mean their lawyers) will do their due diligence to uncover any HR liabilities to ensure they’re not taking on a business that will cost them more in the long run. Anything along the lines of excessive leave liabilities, large bonuses, and “golden parachutes” will be dug up and can negatively affect your asking price. Ensure you keep HR liabilities to a minimum and pay particular attention to agreements with senior staff if you want top dollar for your business.
Boost and maintain employee morale
An obvious make or break for a business sale is employee retention. Buyers will want to see if the business they’re taking over has good morale. They will quickly pick up on whether there is a toxic workplace culture or not by paying attention to workers who are disengaged or letting their productivity slide. These negative traits will impact the value of your business, and the best way to improve and maintain employee morale is through good communication.
When there’s talk of a business sale, naturally, employees will be on high alert; it could be both positive and negative because, let’s face it, fear of the unknown gets to us all. The key is to keep the positivity of a business sale by communicating about the positives a new business owner can bring. There could be improved working environments and increased opportunities. Share the positivity, but be realistic because nobody wants to over-promise and under-deliver, or this may have adverse effects on productivity.
Encourage key staff retention
In some cases, buyers may stipulate that your key employees need to stay on board as a condition of sale. You’ll find this is a regular occurrence in relationship-based businesses, businesses that offer professional services, and when the sale doesn’t involve a merger or acquisition by a similar business.
Reassuring your key employees of their value by offering an incentive to stay has been the most effective method to keeping staff around. When the price of your business is on the line, it may pay more to offer a loyalty bonus to key staff.
Final Thoughts
Getting your HR policies in order is critical when getting ready to sell your business. Business sales can be long and drawn out as potential buyers, especially serious ones, will take the time to properly assess the investment opportunity. For those who need help selling their business, companies like Lloyds Business Brokers can make all the difference in helping you get the best offers.
