Loyalty isn't a retention plan

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Every owner tells the buyer the team will stay. Very few have asked them. Underneath that assumption sit the people whose departure would change the deal, the ones paid below market because they stayed for you, and the promises you made that leave the building when you do.

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I’ve seen it go wrong three ways, and all three start with the same sentence from the owner: “They’ll all stay. They’re a great team.”

In the first, the loyalty the owner was counting on turns out to have been loyalty to the owner, and it leaves when they do. In the second, a senior person hears about the sale late and starts wondering, that same week, whether to look elsewhere. In the third, the buyer discovers that the person they’d regarded as essential never intended to stay after completion.

Nobody in those stories was disloyal. They were loyal to something the sale was about to take away.

Loyalty to you is a different thing

In most owner-run businesses the owner is a great deal more than the boss. You’re the one who hired most of them, the one who settles the arguments, the one who sets the standard, and often the reason they joined in the first place. People put up with a lot because they trust you to make it right in the end.

A sale changes that, whether anyone says so or not. The useful question, then, is which of your people have a relationship with the business, and which have one with you.

You can pass the two-week test and still have this problem. A business that runs for a fortnight without you has shown that its operations can survive your absence. Whether its people survive your departure is another matter.

Find the people whose departure changes the deal

Every business has people it would rather not lose. A sale needs a harder list than that: the people whose leaving would change the economics, the timing, or whether the deal happens at all.

That might be the general manager, or the estimator who prices every job, or the chef, or the person whose name is on the licence, or the salesperson who holds the three biggest accounts, or the developer who understands the system nobody else does. It depends entirely on the business. Once you’ve got the list, work out why each of them is critical. Knowledge, relationships, a licence, technical skill, the team’s loyalty to them, credibility with customers. The reason decides the fix: sometimes it’s retention, sometimes a successor, sometimes cross-training, sometimes bringing other people into the relationships they hold.

And sometimes the uncomfortable answer is that one person has accumulated too much power because the business never built anything around them. That’s a risk whether you sell or not. A sale just puts a price on it.

The economics you’ve been running on goodwill

Look at how these people are actually employed, because a buyer will.

Arrangements drift in an owner-run business. A bonus that’s discretionary on paper and expected in practice. A commission plan that lives in a spreadsheet and three old emails. A car, extra leave, or a flexible week agreed personally with you. A contractor who has worked like an employee for six years. None of it was wrong when it started. All of it becomes a question when ownership changes.

Then there’s pay. Long-serving people in owner-run businesses are sometimes paid well below market, because they stayed for you. Suppose your operations manager earns $150,000 after 15 years with you, and replacing them in the market would cost $230,000. A buyer can reasonably treat the difference as a future cost, because their loyalty has been subsidising your profit, and nobody expects that subsidy to transfer.

Incentives need the same look. One that depends entirely on your discretion loses its force the day you leave. One that rewards revenue and ignores margin produces behaviour a new owner won’t want to pay for.

The hardest items are the promises. The share of the business you mentioned one evening, the promotion you said was coming, the role you’ve half offered someone for when you step back. They’re real to the person you made them to. They’re written down nowhere, and the person who made them is leaving.

Ask them

Owners regularly tell buyers their key people are loyal. A buyer hears that as a hope, and they’re right to.

A real retention plan starts with specific questions. Who needs to stay through the sale, who needs to stay for six months afterwards, and who for two years. What each of them wants. Whether they’re paid at market. Whether their incentives will survive the deal. Whether they expect equity. What happens to their role if the buyer brings in their own management. What would make them leave.

Saying you’d like to exit, fully or in part, is a different thing from disclosing a deal. You don’t need to tell anyone who you’re talking to, or what the deal looks like. In a business set up to run without you, the team should be able to hear “I want to exit” as a sign of what you’ve built: a company they can carry on in. If that sentence would send your best people looking, you’ve learned something a buyer would otherwise find out first.

Either way, retention can’t stay an assumption until completion. For the handful who genuinely matter, it usually means carefully timed conversations, and then whatever fits the person and the deal: revised terms, a retention bonus, an incentive tied to the transaction, a clear future role. The right mechanism depends on the person, the deal, and where you are, which is a conversation for your advisers.

The principle is simple. If the buyer’s price assumes somebody stays, somebody needs to have established whether that’s reasonable. It’s better if that’s you, and better still if it happens a year before the buyer asks.

What the buyer does with it

A buyer can want the business badly and still worry about the people: that you’ll leave and the general manager will follow, that the top salesperson will take three customers with them, that the technical lead will join a competitor, or that the staff will read the sale as the end of the company they joined.

They’ll deal with that worry somehow. You stay on longer than you planned. Key managers sign new arrangements before completion. Retention bonuses appear, and someone has to fund them. Part of the price becomes conditional, or the price comes down, or the buyer decides the risk is too high and walks.

None of this work removes the risk. A buyer is always buying people risk. What the work does is make that risk something they can understand, and a risk they can understand is one they can price fairly.

If you’re raising money rather than selling, the same questions come from the investor, who’s betting on the team as much as on the plan.

If you are the buyer here: meet the people whose names keep coming up in diligence before you meet the ones the owner puts forward. Then ask them what they were promised.

What to do this week

Write down the five people whose departure would most change a buyer’s view of the business. Next to each name, write what they’d lose if you left: a relationship, a promise, a pay rate that only makes sense because of you. Then add what they’re paid against the market, and what you’ve told them, if anything, about the future.

Now check what’s written down against what’s been said. The gaps between those two columns are the conversations you need to have before a buyer has them for you.

The full people review, from finding the key people to the retention questions and the terms a buyer will read, is in Cultivating a Thriving Organisational Culture, free to download from the Download Vault: manolutions.com/downloads.