Why employees are one of the most important factors when buying a business

Good employees are vital for the lasting growth and success of any business. Irrespective of what kind of business you own, a few key employees can either make or break your business. Prior to putting a business on the market, sellers should take every step possible to build a great team and think about how their employees will impact their company. They also need to recognise the importance of factoring in employees when considering the acquisition of their business as this could determine or contribute towards the market value.

When buying a business, one of the most important elements to be evaluated is its employees, and they are often overlooked once the deal is completed. Repeatedly, buyers and sellers forget about their most valuable asset – their personnel, the current employees. They not only provide key insights into the overall customer experience, but they will also help the new owner build their business. Keeping a team of trusted, respected and motivated employees on board can pay off as they will know the business inside out and have the expertise that will help the new owner.

After completing the purchase of a business, there are some new owners who will look to start afresh with all new employees. Making such changes can be a risky approach that could backfire, so it might be better to consider retaining existing employees when buying a business. When reviewing employment strategy, it is important to consider the following factors, as this could have significant outcomes for your organisation’s future success.

Employee competence

Whether you are acquiring a smaller business with less than 10 employees, one with 100 or more, part of your due diligence as a buyer is to identify the strengths, weaknesses and skills of the existing workers, starting with the leadership team. Find out what is working well and identify if there are any skills gaps in the business and whether everyone currently placed in the role is best suited to their abilities and expertise. 

It is then important to identify key performers in the firm who have the right skillset, qualifications and attitude so you can keep them on your side for any future changes planned. Do not forget that your employees will help you build and grow your business. 

Office morale and culture

Never underestimate the importance of morale to the productivity and profitability of a business.

When employees are aware that their company  is being acquired, it is natural for them to be concerned as they will not know if they will be made redundant or will keep their jobs. If the buyer makes immediate changes to the team and sacks one or two, they run the risk of alienating the rest of the staff, which could then compromise their ability to work effectively and increase the chances of losing more staff members in the future.

If the seller has created a great set of values within the business that the staff support and buy into, they are part of what makes it a success. If a buyer can see these values being demonstrated by their employees, they will know it is embedded into the culture, not just a fancy poster on the wall.

Recruitment costs

Employee turnover can be costly and time-consuming for any organisation. This has a dramatic impact on a company’s efficiency, effectiveness, morale and perhaps most significantly, profitability. It takes time and effort to locate new talent and train them up, but if you inherit a fully operational workforce, it makes total sense to retain those skills and leverage their experience, rather than making more work for yourself by seeking out a whole new team.

Additionally, buyers will also want to see that the team already in place has the capacity to take on further growth in the business. If they are already at the limit and maxed out, a new owner will have to recruit first before growing the business, and recruitment is a costly process that is followed with training and does not often pay back for months.

Boosting the competition

For every staff member that a new owner chooses to let go, remember they will be looking for another job and most likely in same sector. With the years of experience they have gained working at your business before your arrival, they will have great insider knowledge of how things work operationally and with clients, irrespective of any changes you intend to introduce. In this sense, laying off all or part of the workforce could effectively be bolstering the competition.

A business takeover is an unsettling and stressful time for employees, and on top of that, there are often legal implications involved. Empathy, transparency, and open channels of communication are crucial so you can gain the trust of your staff. It is your job as a new employer to tackle any concerns head on and keep staff happy to ensure they continue to work at peak performance with minimal disruption to the business and clients. By retaining the workforce, it will immediately give you, the new owner, the expertise you need to run the business and continue to successfully grow the business.

For advice on buying or selling a business, please get in touch with your local office.