Do I need key employees on side before planning my exit?

This is a different question from when to start planning your exit. Planning is private; the question is when your key people become part of it. BDC’s guidance on negotiating a sale says buyers assess all potential risks, from customer concentration and key employee reliance to regulatory exposure and operational inefficiencies, and that lower perceived risk typically equates to higher value. On BDC’s account, if a few people hold the knowledge or the customer relationships, that reliance is a risk a buyer weighs in setting value.

What the business needs from them

BDC lists transferability among the factors in price: how easily the business can operate without the current owner. It says strong management teams, documented processes and clear systems increase value. Its guide to selling tells owners to fill any human resources gaps, especially in the management team, and to make sure the business does not rely on their presence to keep functioning. Ask your advisors how much of that work can be done before anyone is told about a sale.

Telling them, and keeping it quiet

BDC warns that a change in ownership can be disruptive for employees, customers and suppliers, and that depending on a listing site’s confidentiality procedures, word can get out to employees, customers or suppliers that you are selling. It recommends a transition plan with the buyer that includes a plan to retain employees, customers and suppliers and how you will communicate with them. Ask your lawyer about confidentiality undertakings before you share details with anyone.

Putting it in the deal

BDC’s guide to purchase agreements notes that ancillary agreements often accompany the main agreement and may cover employment for key employees, alongside a non-compete and a transitional services agreement. So a buyer’s wish to keep a key person can be written into the transaction documents. Review each key person’s existing contract with your lawyer, and ask whether the buyer will want to speak with them and at what stage.