In many cases, a handful of key employees are vital for the success of a business. A smart buyer is likely to want to keep those employees. The ongoing success and profitability of the business is highly dependent on them.
A company’s employees are familiar with customers and suppliers. They’ve built up solid relationships that are vital to the ongoing success of the business. They also know the industry, so they know the strengths and weaknesses of your competitors and are probably quite experienced in all aspects of your particular business niche.
A buyer will want to purchase a well-running business with great future prospects. Sellers should take every step possible to build a great team long before placing their business on the market. The best way to add value to your business is to have key employees that know your business, and will want to stay on with the new buyer.
If the only key employee is the seller, a buyer’s risk goes up considerably. A buyer needs to know the business will continue to perform well, even after the seller leaves. It costs a considerable amount of time and effort to the new buyer to get to know the working mechanisms of a business, without an experienced and knowledgeable management team to help them.
One of the first steps in the buyer’s due diligence process is to identify key employees. Assessing if an employee is valuable involves more than simply evaluating an employee’s current benefit. Their future value and potential damage they could cause upon leaving are all factors to consider.
Never forget that your employees help you build your business. The importance of specific employees to any given business varies widely. A seller should understand what employees are key and why. Sellers should be able to articulate how key employees can be replaced. Savvy buyers will understand the importance of key employees and evaluate them.