Employee Retention Raises Business Value, Especially Now
“To win in the marketplace, you must first win in the workplace.” Those words of Doug Conant, business leader and former CEO of Campbell Soup Company, ring particularly true today.
The talent market was tight before the pandemic, but now we’re in a critical state. Finding employees, and keeping them, is a challenge for everyone. And if you’re selling your business, it just might be the buyer’s number one concern.
In the latest IBBA and M&A Source Market Pulse Report, a quarterly survey of M&A advisors, employee issues topped the list of buyer due diligence concerns. Employees, specifically longevity, loyalty, and work ethic, ranked ahead of other priorities like operations, revenue, and customer concentration.
When businesses don’t have enough talent to grow organically, they may turn to acquisitions instead.
But buyers know that to make that strategy work, they need to acquire a fully staffed, stable employee team and a culture of retention.
Employee issues buyers care about right now:
Turnover: Buyers are looking at turnover and retention trends. If you’re constantly in hiring mode to replace departing talent, buyers will see that as an element of risk.
Culture: People stay in a job for more than salary and benefits. Buyers want to know what it is about your workplace that makes people stay – and will it mesh with their own culture?
Training: A strong learning and development program is one way to keep people loyal and engaged. Buyers see value in companies with a culture of internal mentoring and promotion, particularly if you can show how it’s linked to employee retention.
Cross-coverage. COVID-19 shone a spotlight on the benefits of cross-training. Cross-trained employees are better able to fill in for workers who want time off, who need extra help during a busy shift, or those who are sick or quarantined and unable to come into work.
Leadership potential. If you have employees who could take on new challenges and help a buyer grow, think about how you can retain them and keep them engaged in the run-up to selling your business.
However, we do not recommend disclosing your exit plans to employees. If employees find out your business is for sale, they may look for another job rather than risk an uncertain future with a new owner.
Depending on your goals, we may be able to find a buyer who will offer equity positions to select team members. The chance to get a real ownership stake in your company could be just the incentive your top talent needs to stay.
Talk to your M&A advisor about your key employees, stay bonuses, and what kind of succession planning is right for your situation.
For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.
