The 2 Conversations That Manufacturing Business Sellers Dread The Most

By: Frances Brunelle

dreaded conversations for sellers

When you’re selling your manufacturing business, there are two conversations, which if they go wrong, can sabotage the sale of your business. They are the most dreaded conversations for sellers of a manufacturing business during the time they are selling their business. No, I’m not talking about the conversation with your wife; I’m talking about informing both your staff and your customers that your business is on the market.

If these conversations aren’t handled properly, they can wreck your entire business. Employees may jump ship and leave you struggling to meet the needs of your customers. Customers may start to develop a backup plan, moving work to other service providers because of the uncertainty of your ongoing availability. There are specific things that you can do to ensure that these conversations and transitions happen smoothly and by the numbers.

Conversations With Your Staff

The first of the two most dreaded conversations for sellers:  is it actually wise to tell your staff in advance? That depends on your relationship with them. I’ve had clients successfully navigate the process by telling the staff in advance and also not doing so. If you have a great working relationship with your staff, you might consider having a conversation that goes something like this:

“ In preparation for my retirement, I’ve engaged the help of a mergers & acquisitions specialist. I’m working with a company that has strict instructions to find buyers that will want to keep the existing staff. The experts tell me that the most likely buyer of this business will be a larger company that will possibly provide you all with more benefits and growth opportunities. You’ve all been an important part of the company’s growth and you are all important to me. I wanted you to hear this from me personally and give you the opportunity to ask questions and express any concerns you might have. Finding the right buyer and closing the deal may take as long as a year. Even after the transaction has closed, I will likely stay for several months to help the new ownership and employees transition. If at any time during the process you have concerns or questions, my door is always open.”

Again, the above only works if you have a good relationship with the people you’re speaking to. If you don’t feel your employees have respect for you as a boss, I would highly recommend NOT telling the staff. There are benefits to full disclosure. You don’t have to worry about what to tell the staff every time your broker visits with potential buyers. On a side note, if you think you can successfully sell a manufacturing business by having potential buyers visit only when you’re closed, think again. Buyers want to see activity and staff. In almost every recent sale we’ve closed, buyers also are particularly interested in the hair color of the staff. Yes, hair color! If everyone has white or gray hair, a buyer will be concerned about their ability to replace skilled workers as yours retire. If too many of the staff are close to retirement, some buyers will seek to discount the price.

If you’re opting to not tell your staff in advance that you’re selling, you should tell them something to avoid speculation. Here’s what I suggest. Your broker is a manufacturer’s rep who will be bringing potential customers in to view your machining capabilities. It works perfectly because they’ll likely see the broker several times coming to the facility with different groups.

Conversations With Your Customers

The second of the two most dreaded conversations for sellers:  As to having the conversation about the sale of your business with your customers, in a word, DON’T. They do not need to and shouldn’t know that your business is on the market. Telling them in advance of the sale could totally wreck your business. This conversation needs to be navigated very carefully. Typically after the sale, the retiring owner will remain for a few months. During that time they can be told that you’ve merged with another company to increase capacity and better serve them. Most customers will be thrilled to hear this news. During this time, while the retiring seller is still with the company, introductions to the new leadership should be made. A gradual transfer from the old to new regime is the best way to ensure no disruption and continuity of customers.

Whether the conversation is with your employees or your customers, physiological savvy and emotional intelligence are the names of the game. It is imperative that you put yourself in THEIR shoes. Preemptively addressing their concerns will help you get more of what you want and a positive result!

If you would like expert advice and support while considering the sale of your manufacturing business, Contact Us or Register as a Seller to qualify for a business valuation.

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