The Role of Employee Retention in Business Sales

When it comes to selling your business, there’s a crucial factor that often flies under the radar but can make or break a deal: employee retention. Let’s dive into why keeping your key team members on board is so vital during this transition and how it can significantly impact your business’s value and attractiveness to potential buyers.

 

Why Employee Retention Matters in Business Sales

Think of your employees as the backbone of your company. They’re not just names on a payroll; they’re the collective knowledge, skills, and relationships that keep your business running smoothly. When you’re looking to sell, potential buyers aren’t just interested in your assets or customer base – they’re keenly aware of the human capital that comes with the purchase.

 

Impact on Business Valuation

Here’s a sobering thought: the stability of your workforce can directly affect your business’s value. Experienced and senior management can add significant worth to your company[1]. If key employees start jumping ship during the sale process, it can lead to a decrease in productivity, loss of critical business knowledge, and potentially a drop in the overall value of your business.

 

Buyer Concerns and Continuity

Put yourself in a buyer’s shoes for a moment. They’re not just acquiring a company; they’re investing in its future potential. A stable workforce signals continuity and reduces the perceived risk of the investment[2]. If there’s a chance that key employees might leave after the sale, it could deter potential buyers or lead to a lower sale price.

 

Strategies for Retaining Key Employees During a Sale

So, how can you keep your star players on board during this critical time? Here are some effective strategies:

1. Implement Stay Bonus Agreements: Offer financial incentives for key employees to stay through the sales process and for a period after closing[5]. This not only motivates them to stick around but also aligns their goals with the success of the sale.

2. Introduce Phantom Stock Agreements: These plans give key employees many advantages of owning stock without actually giving them company shares, often contingent upon a business sale[3].

3. Offer Competitive Compensation: Consider paying key employees about 20% above the current market rate[1]. This shows appreciation for their contribution and makes it less tempting to look elsewhere.

4. Focus on Employee Satisfaction: Regularly track employee satisfaction and address concerns promptly. Happy employees are more likely to stay, contributing to the stability of the business[1].

5. Communicate Openly: While you may not be able to disclose all details of the sale, keeping key employees in the loop can prevent them from feeling blindsided and potentially quitting[3].

 

The Long-Term Benefits

Investing in employee retention isn’t just about securing a smooth sale; it’s about building a stronger, more valuable business overall. Companies that excel in employee engagement report a 21% increase in productivity and a 22% rise in profitability[6]. This not only makes your business more attractive to potential buyers but also ensures its continued success post-sale.

Remember, your employees are more than just assets – they’re the heart of your company. By prioritizing their retention during the sales process, you’re not only increasing your business’s value but also ensuring its legacy continues long after you’ve handed over the keys.

In the end, a strong employee retention strategy can be the difference between a good deal and a great one. It’s an investment in your business’s future that pays dividends, whether you’re selling or not. Discuss your business with an Advisor by emailing us at in**@************rs.com.

 

Citations:

[1] https://www.growandexityourbusiness.com.au/the-crucial-role-of-staff-retention-in-business-valuation-and-sale/

[2] https://www.confederationgroup.ca/importance-of-employee-retention-and-the-sale-of-your-business/

[3] https://www.bizbuysell.com/learning-center/article/retaining-key-employees-is-critical-to-selling-your-business/

[4] https://n3business.com/investing-in-employee-retention-to-boost-business-value/

[5] https://touchstoneadvisors.com/how-to-retain-key-employees-when-selling-your-business

[6] https://sparkplug.app/blog/why-successful-businesses-prioritize-employee-retention

[7] https://www.netsuite.com/portal/resource/articles/human-resources/employee-retention-benefits.shtml

[8] https://www.beqom.com/blog/understanding-the-importance-of-employee-retention

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Peter M. Babilla, CFP®, CRPS®

PARTNER

Peter Babilla brings 40 years of experience in investment management and fiduciary* financial consulting to Vertex Planning Partners, LLC.

Pete graduated from Indiana University in Bloomington, Indiana with a Bachelor’s of Science in Finance.

He began his career in 1983 with a focus on institutional fixed-income portfolio management, primarily working with community banks. After a decade serving institutional clients, Pete shifted his focus to working with individuals, families and business owners, providing guidance and education in all areas of Wealth Management.  Among his areas of focus are accumulation and retirement planning, investment management, risk management, and estate and wealth transfer.

Pete’s planning philosophy allows him to create a personalized program for clients, based on their own unique goals and circumstances.  The extensive investment and planning platform offered by Vertex enables him to create a highly customized program, tailored to each individual client.

Pete and his wife Suzanne have two children, and have resided in Wheaton, Illinois for the past 30 years.  He enjoys golf, reading, and traveling with his family.  Pete gives back as a past Board Member of the Epilepsy Foundation of Greater Chicago, where his focus is on improving the lives of those living with epilepsy.

Pete works as fiduciary for his clients and holds the CERTIFIED FIANANCIAL PLANNER™ (CFP®) designation and the Chartered Retirement Plan Specialist (CRPS®) designation.

JUSTIN J. D'AGOSTINO, CFP®, ChFC®, CRPC®

PARTNER

Justin D’Agostino joined Vertex Partners in 2019 and serves a select group of business owners and affluent families. He specializes in investments, financial planning, and succession planning. His interest and knowledge in providing comprehensive financial planning and wealth management services to clients was sparked when he worked at a boutique tax and wealth management firm in Michigan. He has nine years of experience in the financial services industry, and his mission is to provide every client with targeted, comprehensive financial advice and to help them implement customized strategies designed to move them closer to accomplishing their unique goals.

Justin attended Hillsdale College where he earned his BA in Accounting and Financial Management and was a member and captain of the football team. Justin is a CERTIFIED FINANCIAL PLANNER™ Professional, holds the Chartered Financial Consultant® and Chartered Retirement Planning Counselor™ designations.

Justin and his wife, Alexandra, reside in Chicago, Illinois. He is an avid sports fan and enjoys golfing, playing soccer and spending summer weekends with his family.

Scott A. Sandee CFP®, CIMA®, CPWA®, CEPA

MANAGING PARTNER

Scott Sandee brings over 20 years of experience as Managing Partner. He is responsible for leading the firm’s efforts in assisting middle-market business owners and seven and eight-figure families to plan and realize financial goals based on their unique aspirations and situations.

With a privately held family business background, Scott has helped owners prepare for and execute a successful transition. In addition, he works with business owners and their advisors to develop financial strategies to maximize sales proceeds and minimize future taxes.

Before joining Vertex, Scott served in financial planning and investment strategy roles at Oxford Financial Group, Capital Group, and The Northern Trust Company, working with Chicago’s HNW/UHNW families clients.

Scott holds the Certified Financial Planner®, Certified Private Wealth Advisor®, Certified Investment Management Analyst®, and Certified Exit Planning Advisor designations. Scott earned his B.S. in Computer Science from Northern Illinois University, and his family resides in Wilmette, IL.

Julie Hupp CFP®, MBA

PARTNER

Julie Hupp, CERTIFIED FINANCIAL PLANNER™ professional, has worked in the accounting and corporate finance field since 1987. She began her career as a CPA with Deloitte & Touche, specializing in the financial needs of small businesses. Then spent the next 13 years in corporate financial planning and business development at Baxter and TAP Pharmaceuticals. Recognizing her passion for personal financial planning, Julie started her business in 2006 where she focuses on comprehensive financial planning strategies and implementation.

Julie graduated from University of Illinois with a BS in Accountancy. She received her Master’s in Management with a concentration in Finance from Northwestern University’s Kellogg School of Management in 1994.

Outside the office, Julie is the co-founder of the 12 Oaks Foundation, which has merged with Cal’s Angels, and is a former Board member. Julie enjoys cooking, reading, running, triathlons and doing almost anything outdoors. A great weekend is spending time with her husband and two adult kids boating at their lake house in Wisconsin.

Steven P. Franzen, CPA, PFS, CGMA

MANAGING PARTNER

Steven P. Franzen, CPA, PFS, CGMA is a public accountant and consultant with more than 23 years of experience helping individuals and businesses reduce their tax liability.  He began his career under the guidance of Patrick M. De Sio, CPA, CGMA and in 1996 became Mr. De Sio’s partner in De Sio, Franzen & Associates, Ltd. Steve’s expertise include entity design, complex tax strategies and multigenerational wealth transfer.  As Managing Partner, Steve conducts his practice under the philosophy that the client’s investment in their CPA should yield a return on that investment – most of the time that return is realized when working with clients on planning for their future. In an effort to increase the planning capabilities of the firm,  Steve formed Vertex Accounting Partners, LLC to ensure their guiding philosophy will continue well into the future.

Steve is a certified public accountant and has earned the professional designations of Personal Financial Specialist and Chartered Global Management Accountant.  He is a member of the American Institute of Certified Public Accountants and the Illinois CPA Society.  Steve earned a B.S. degree in accounting from Millikin University.  He and his wife Kristie live in Sugar Grove, IL with their three children.

Gregory P. Benner, CPWA®, CFP®, CLU®, ChFC®, AIF®, RMA®

MANAGING PARTNER

Gregory P. Benner, CPWA®, CFP®, ChFC®, CLU®, AIF®, RMA® has over twenty-two years of experience as a financial advisor. Greg’s practice is based on developing holistic financial plans that help his clients integrate sophisticated retirement, tax, risk management and estate planning strategies into an actionable plan, then stay the course as their behavioral coach.

Prior to founding Vertex Planning Partners, LLC, Greg spent four years as a founding partner of a Registered Investment Advisory firm affiliated with LPL Financial. He also spent seven years with JPMorgan Chase as a Senior Financial Advisor and was a Financial Representative with Northwestern Mutual Life.

Greg holds the Certified Private Wealth Advisor® designation and is a CERTIFIED FINANCIAL PLANNER™ Certificant. He also holds the Chartered Financial Consultant®, Chartered Life Underwriter®, Accredited Investment Fiduciary™, and Retirement Management AdvisorSM designations. He earned a B.S. in Finance from Miami University.

He and his wife Lindsey reside in Naperville, IL with their daughter and twin sons.

Michael D. Bellis, CFP®, CLU®

MANAGING PARTNER

Michael D. Bellis, CFP®, CLU® began his career as a financial planning professional in 1994. His practice is centered on holistic financial planning, astute risk management strategies and empirical, research-driven portfolio construction. He began his career in partnership with his father under the name Bellis & Associates. Together, their practice and reputation for excellence dates back more than 40 years and includes multiple generations of the same families. After his father’s retirement several years ago, Mike continued to build a client-centric, consultative practice before forming Vertex.

Mike holds the CERTIFIED FINANCIAL PLANNER™ certification and is also a Chartered Life Underwriter. He has been an active member of both the Society of Financial Services Professionals and the National Association of Insurance and Financial Advisors. He earned a B.S. in Business & Marketing from Illinois State University. Mike is a lifelong resident of Naperville, Illinois. He and his wife Tanja have three children.