Retaining Your People

Once you’ve decided to inform your employees, you must formulate a plan to help ensure the buyer can retain them. Here are several strategies for doing just that.

Retention Bonuses

If you decide to tell your employees, I suggest offering your key staff a bonus for staying through the transition. The bonus should be substantial enough to motivate them to stay for a significant period following the transition, especially if you’re financing a portion of the sale. You can also consider offering employees the retention bonus as compensation for signing a non-compete or non-solicitation agreement, which should improve the enforceability of those agreements. 

Amount and Timing

You can also consider releasing the bonus in several stages for six to 12 months following the closing. A typical bonus is 5% to 20% of their annual salary. You shouldn’t give the employees so much money that they can band together and start a competing business, but it should be enough to motivate them to stick around after the closing. Releasing this bonus in stages helps prevent this problem.

Explaining the Bonus

I recommend positioning the bonus as a share of your success. If you position it as a “retention bonus,” your employees may realize the leverage they have over you and may use that perceived clout to their advantage, which may threaten the sale. Instead, let your employees know you’ll share a piece of the pie with them because the company wouldn’t be in a position to be sold without their loyalty and hard work.