At some point during the sales process you will need to decide whether to stay on and train the new owners. Most buyers expect that this will happen, because the success or failure of a business can quite literally depend on the management of the business in the early transition period and the new owners will want someone to smooth the way and show them the ropes.
This is even more important if you are offering seller financing, because if the business fails under the new ownership, you won’t receive your final payments.
Another consideration is when your business is being bought by a strategic buyer, which is someone who wants to expand their business or cut out the competition. Under these circumstances, the acquiring business may ask you to stay on for a certain period of time to help with the move, continuing to run your business as one of their divisions.
Pros and cons of staying on to train the new business owners
If you are staying on after the sale to train the new owners, the minimum period is usually two weeks for small businesses, but it can be much longer, either part-time or full-time, even changing to a consulting role after a certain period of time.
To be honest, most buyers will want the old owners out as soon as possible and most sellers are happy to oblige! So the length of your stay needs to be negotiated with the buyer, but it needs to be long enough to ensure a smooth transition between owners.
As the seller, you will need to share everything about your role with the new owner, from opening and closing the building each day, to dealing with security and introducing them to your employees, key clients and suppliers, and providing general tuition on the operation of the business itself. The biggest problem for most sellers during this training period is that they are no longer the owner and they are not in a position to make decisions.
However, whilst employees, clients and suppliers may still contact you during this period, you will need to hand all business related questions over to the new owner. This can be an extremely difficult time for you, particularly if you have an emotional attachment to the business, which is why you need to minimise the time spent training, so that you can leave and start your new life.
Pros and cons of staying on to manage your ‘division’
When your business is acquired by a much larger organisation, the owners are often asked to stay on and manage their business, because it makes for a smoother transition. You might believe that this will give you the best of both worlds, because you maintain your relationship with your employees and clients and you don’t have to make any major decisions.
These positives can actually be negatives, particularly when you can’t make the decisions you are accustomed to making as the previous owner. Waiting on senior management to make a decision, one which seems obvious to you, but takes forever to be finalised (as in many large organisations) can be extremally frustrating, not only because of the time factor, but because you are no longer involved in the overall management of your business.
The transition from business owner to employee can be difficult for many business owners but you can negotiate your role before making your final decision as part of the business sale contract. The ability to manage your own budget and be responsible for your division’s profits, as well as hiring and firing staff can sometimes be enough to quench the frustration of not being in control of the company’s direction, and of course you also have annual leave and sick leave as an employee!
Staying on to train the new owners is generally an accepted norm, but whether you stay on to manage your business under an acquiring company is entirely up to you.
Selling your business? Download our Sellers Toolkit to find out everything you need to know about selling your business and book a consultation with the team at Verified Businesses – the leading Business Broker on the Sunshine Coast.