A business transitioning to a new owner naturally causes a major upheaval in the way a team runs and operates, especially leading up to the sale.

Even so, very few family-run or small businesses seem to be prepared to manage this important change. According to a 2023 U.S. family business survey by consultancy PwC, almost two-thirds of such businesses do not have a succession plan in place. In retirement plan advisement, active merger-and-acquisition activity makes the question of team management amid sales or handovers an important one.

Cynthia Turoski, a partner in the Bonadio Group, works with businesses on sales and succession planning. She points first to preparing those expected to remain in leadership positions well ahead of a possible transaction.

“If you have successors that you want to transfer the firm to, you want to make sure that you’re grooming them to take over ownership and management,” she says.

Turoski says she has witnessed instances in which an owner has picked a potential successor, but the person is not interested in or suitable for the role. That is why, she says, making sure a potential successor is interested and committed is a key first step, with grooming and close training to follow.

In addition to identifying a competent successor, she says preparing the entire management team is equally important, including making sure they will fill in any gaps and skills the owner may take with them when leaving.

Keeping Them on Board

A third part of this puzzle, Turoski says, once the possibility of a leadership change becomes more well-known, is for the owner to communicate to the extended staff a preference that the current team stay in place for continuity and firm knowledge, rather than taking the change as a moment to jump ship.

“You want to make sure employees know there is a plan, because they’re always wondering, ‘What’s going to happen when the owner retires?’ and they might start looking for another job,” she says. “You want to make sure they’re incentivized to stay, so that’s where the communication is important.”

A fourth point she notes is that, when there’s a pending transition, it may be a good time to add employee perks. These might include boosting retirement plan benefits or offering qualified deferred compensation plans.

Dealer’s Choice

Finally, of course, the selling owner must feel confident the move is in the best interest of both the firm and themselves.

“If an owner is planning to sell to an outside company, they need to make sure the terms would work for their needs financially, because, most times, it’s their baby and one of the biggest things on their balance sheet,” Turoski says.

Owners should understand what they need from the transaction to meet their own personal financial goals, Turoski advises. They must consider if the sale to an outsider is feasible under the terms of cash flow; they must prepare the tax side of the sale; and they must build wealth outside of the business.

“Plan for the business to not be the only thing on their balance sheet, so that the owner has more choices,” she notes. “Those are important things any small business should tend do.”

In the best-case scenario, a firm will transition with its staff intact and a competent management team providing reliable communication to employees to bolster confidence in the change. That outcome, she notes, is not just good for those remaining, but often for the seller as well.

“Usually owners care about their employees and want them to also have security,” she says. “The business is the owner’s legacy.”