How to align key employees when planning an eventual business exit 

Planning an eventual exit from your business is a strategic move that requires careful consideration, and one key aspect of this process is aligning your key employees with your exit strategy. Whether you’re considering selling the business, passing it on to a successor, or even retiring, ensuring that your key employees are on the same page and aligned with your vision for the future of the business is essential.

When considering your business exit strategies, not only should you prioritise financial aspects, but ensuring that your key employees are aligned with your vision for the future of the business is equally important. Employee share plans are a great way to motivate and incentivise employees, as well as creating that important alignment to your future goals  

In this article, we’ll explore the considerations you need to make to successfully align your key employees with your business exit plan. If done properly, aligning your key employees can not only result in a more profitable business, but also a more transferable company too.

Assessing your team’s readiness to step up as you are preparing for the upcoming transaction, will be time well spent; since they will have a significant impact on the interest your business will generate among prospective buyers, and the valuation it receives.   

Communicating with your key employees openly  Aligning key employees with your business exit plan, is something which should begin well in advance of the actual exit. It is important to begin open and transparent conversations with your key employees very early on in the process, this helps build trust and gives employees a sense of ownership in the process.

It is also key to maintain an open dialogue throughout the process, enabling any questions and concerns to be voiced, making it easier to keep everyone aligned with the exit strategy.   

Identify & Reward Key Employees  You might already have a good idea on who the employees are within your business that you are wanting to align with your goal and can take the business forward when your eventual exit happens. These may include managers, department heads, or those with specialised skills that are essential to the operation of the business. If you’re unsure on who your key employees are, some general indicators are:  

• Having an owner mindset  
• Exceeding expectations  
• Providing input on business strategies  
• Good team player and rapport with colleagues  
• Putting the business interests ahead of their own  

Incentives & Ownership opportunities  To ensure commitment from your key employees during and after the transition, consider offering incentives which align with your business exit strategy. Providing your key employees with an equity share in the business, can help lower the risk of talent moving to competitors, and gives employees a vested interest in your company’s ongoing success.

From our experience, we have found that a great way to incentivise and align employees with a potential business exit is by setting up an employee share plan. Key employees having skin in the game drives higher productivity, more leadership, less owner dependence, faster growth and more innovation, and ultimately a significantly more valuable business!  

Training and development   Investing in the ongoing training and development of your key employees to prepare them for the challenges of a changing landscape will not only enhance their skills, but it also demonstrates your commitment to their growth and success. Training and development can also ease their concerns about their roles in the company following a sale.  

Defining roles and responsibilities

1. Ensure that you clearly define the roles and responsibilities of your management team in the exit plan.   
2. You could also consider designating a couple of people within your management team to specifically manage the exit plan, this can help to take some of the pressure off you.  

Document key processes and knowledgeEnsure that critical business knowledge and processes are documented and accessible to your key employees. This knowledge transfer is crucial to maintaining the stability of the business during the transition and journey to exit. It also empowers your team to operate effectively in your absence.   

As a sole business owner, the alignment of your key employees is crucial to ensure a successful business exit. Building and nurturing a strong management team, offering incentives, and bringing them into ownership, will motivate them and drive business growth. By having the right employee share plan in place, will create the momentum and alignment that is going to drive your business’s growth and value, on your journey to an eventual exit. 

As always, we recommend speaking to your advisors about the best steps before making any changes. If you would like to discuss business exit planning, please get in touch. Our tax advisors are skilled in such transactions and can navigate the process smoothly. For more information on how we can help you and your business, please contact us via info@oldfieldadvisory.com or call 02476673160 for support and advice. Let’s work together to grow and strengthen your business.

Please note: This article is provided for information only and was correct as at time of writing (07/11/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.