Why Employee Retention Matters for Your Exit Strategy

Looking at an exit strategy? Employee retention is important at any stage of business. But for owners contemplating a sale, a strong record of retention could mean significantly more value and a faster transition period.

Buyers want to know how your business stood up against adversity. From 9/11 to the Great Recession to COVID-19, buyers still ask about past economic hardships: โ€œBut howโ€™d they do in _______?โ€ Today, buyers want to know how youโ€™re getting through the global talent shortage.

Good Talent is Rare

Labor Department data continues to show there are roughly two job openings for every unemployed person in the U.S. Meanwhile, 44% of active employees are “job seekers” who are actively looking for new work or plan to look soon, as reported by Willis Towers Watson. Itโ€™s no surprise that competing employers are out there looking to poach your best personnel.

Importance of Retaining Good Talent When Preparing for M&A Activity

If youโ€™re thinking about selling your business in the near future, itโ€™s more important than ever to focus on retaining your talent. This means ensuring compensation is at or above market rate. More importantly, it means spending time with your employees and building a great culture.

As business owners, we must carve out more time to build connections. If you can keep your team together, youโ€™ll have a better company now and a proven group when it comes time to sell. You need to invest in your people just like you invest in your company.

Related Article: How Stay Bonuses Add Value for Business Sale

What Buyers are Looking For

Buyers are looking at turnover and retention trends. If youโ€™re constantly in a “hiring mode” to replace departing talent, buyers will see that as a risk. On the other hand, a well-tenured team can increase your business value in todayโ€™s market.

How to Protect Your Staff After the Sale

Business owners with strong leadership teams wonโ€™t need to stick around as long after the sale. In fact, a sale can be an integral part of succession planning. In deals involving private equity, weโ€™re seeing a considerable number of buyers setting aside anywhere from 8-12% of the company into an incentive pool for executive non-owners.

Your management team can become minority owners of the business through the transition. Buyers are willing to give up a percentage of the company to keep proven leaders.

Employee retention is important at any stage of business. But for owners contemplating a sale, a strong record of retention could mean significantly more value and a faster transition period.

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