How to keep employees after you buy a business

In many small companies, the people are a large part of what you paid for. The technician who knows every customer's equipment, the office manager who understands how billing really works, the foreman the crews will follow anywhere: none of them appear on the balance sheet, and all of them can leave.

Many will stay if you give them good reasons to. Here's how to handle the change of owner so that they do.

What employees worry about

When people hear their company has been sold, they rarely think "good news". They think:

• Will I keep my job?
• Will my pay, hours or benefits change?
• Will the new owner change everything about how we work?
• Will I have to prove myself all over again to someone who doesn't know what I've done here?
• Is the old owner abandoning us, and is this new person going to sell us on again in a year?

You can't make these worries disappear in one meeting. You can answer them honestly, and then spend the next months showing that you meant it.

Meeting key people before closing

There may be one or two people the company can't run without. If so, you'll want to meet them before you commit, and they'll want to meet you.

It's up to the seller to arrange that meeting. Many owners keep a sale confidential until close to the end, for good reasons: a rumor can unsettle the whole staff, or reach customers and competitors. Ask the seller, explain why it matters to you and agree together on when and how. Often the meeting happens late, after you've reviewed the financial records and before closing.

Some buyers offer key people a stay bonus: an amount paid if they're still with the company after a set period, such as six months or a year. It can be money well spent, but it's a cost to plan for, and how it's written matters. Talk it through with your attorney and accountant; our post on your deal team explains who does what.

How to tell everyone

Agree with the seller on the plan in advance. A common approach looks like this:

• Tell everyone on the same day, at closing or right after, so nobody hears it secondhand from a customer or a coworker.
• Do it in person, together. The seller introduces you and says why they chose you. Their endorsement carries weight you can't create on your own.
• Keep your part short and honest. Who you are, why you bought this company, what isn't changing, what you don't know yet and how people can reach you.
• Then meet people one on one over the next couple of weeks.

Here's an example of what you might say. Put it in your own words:

"I bought this company because of what you've all built. I'm not here to change how you do your jobs. Your pay and your schedule stay the same, and payday is still Friday. Over the next few weeks I'm going to spend time with each of you, because I have a lot to learn. If there's something I don't know yet, I'll tell you that, and I'll tell you when I expect to know."

Only say what's true. If you're keeping pay the same, say so. If you aren't sure about something, don't guess to make the room feel better.

Pay, benefits and paperwork

Steady pay and benefits are the strongest reassurance you can give. In practice:

• Make the first payroll perfect. On time, correct, same pay schedule. One wrong paycheck undoes a lot of goodwill.
• Keep pay rates and benefits the same at first. If changes are coming, make them later, explain them, and talk to an employment attorney before you change anyone's pay, hours, title or benefits.
• Settle accrued vacation in the purchase agreement. Whether the seller pays out unused vacation at closing or you honor the balances, decide it before closing and tell people how it works.
• Sort out health insurance before closing. If the company offers health coverage, find out whether the plan continues, transfers to you or has to be replaced, and make sure there's no gap. A benefits broker and your attorney can work this out with you. The same goes for any retirement plan.

There's also paperwork that changes even if nothing else does. Many small companies change hands through an asset purchase: you buy the company's equipment, customer relationships and name rather than the seller's shares. In that case your company becomes the employer. On paper, everyone starts a new job with you, even though nothing about their day changes. That affects payroll accounts and taxes, new-hire forms and employment eligibility checks.

One Florida example: the state calls its unemployment insurance tax the reemployment tax, and it has its own form for anyone who acquires an existing business. The Florida Department of Revenue asks you to file it within 90 days of the purchase. Taking over the seller's tax record can bring any past-due tax with it, so ask your accountant to handle this one.

Then there are eligibility checks. The federal Form I-9 verifies that each employee may work in the United States, and according to U.S. Citizenship and Immigration Services, a buyer has two choices. You can treat the employees as new hires and complete new forms, or treat them as continuing employees and keep the seller's forms. If you keep them, you take on responsibility for any errors in them. Florida also requires private employers with 25 or more employees to use the federal E-Verify system for new hires. Ask your attorney which approach fits your purchase, and how these rules apply to the people you take on.

Make only promises you'll keep

The temptation in that first meeting is to promise everything: no layoffs ever, raises for all, nothing will change. Resist it. A promise you break in month eight costs more than an honest "I don't know yet" in week one.

Good promises are specific and within your control:

• "Your pay stays the same."
• "I don't have any plans to cut jobs."
• "If anything about your role changes, you'll hear it from me first, and well in advance."
• "I'll be here every day for the next few months, learning."

If you already know changes are coming, such as a new software system or a different schedule, say so early and explain why, rather than letting people discover it.

The first months

What you do after the announcement matters more than the announcement. Our post on your first 90 days covers the one-on-ones, working alongside people and fixing what they ask for. A few more things are worth adding for the team:

• Keep every small promise. If you said you'd look into the overtime schedule by Friday, look into it by Friday. People judge a new owner on the small things first.
• Listen widely. It's easy to lean on whoever talks to you most. The quiet technician or the part-time bookkeeper may know more about what's really going on.
• Don't compare everything to your old job. "At my last company we..." gets old quickly.
• Recognize good work specifically and in the moment.
• Keep the seller visible, if your agreement allows. A seller who backs you in front of the team during the transition does a lot of your work for you.

If someone leaves anyway

Some people will leave after a sale, whatever you do. Some were ready to go and stayed out of loyalty to the old owner. Don't take it personally, and don't panic.

Reduce the risk ahead of time: find out who knows what, write down how critical tasks are done, and cross-train so no single departure stops the work. If someone holds a license the company depends on, as is common in trades like HVAC or electrical contracting, you need a plan for that before closing, not after.

When someone does leave, ask them, kindly, why. Then thank them for their work and part on good terms. In a small town or a small industry, the people who stay will notice how you treat the people who leave.