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TP Bites: Selling a business — Communication is essential

In this episode of TP Bites, we discuss the reputational risks of selling a business and why getting the communications wrong during a sales process can cause long-term damage to the business and the founder.

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In this episode of TP Bites, we discuss the reputational risks of selling a business and why getting the communications wrong during a sales process can cause long-term damage to the business and the founder. The full research report this podcast is based on can be downloaded here.


Hector: Welcome to TP Bites. Today, I’m with Luke and Jordan. Thank you very much for taking the time to sit down to do this podcast. Today, we’re going to be talking about our latest research note called “Selling up risks reputation damage”.

For our listeners, this research note can be downloaded on our website. I would advise you to go and download it and take a read before listening to the podcast because you’ll find it a lot more insightful. 

But before we start, why don’t we quickly run down what the research note is about, why we did it and who it’s targeting. Jordan, would you like to explain that to us?

Yeah, of course. So as people know, we conduct these on a monthly basis. This one was specifically around the reputational implications of selling a business. 

If you’re an entrepreneur, who owns a business, you’ve been associated with that business for 10,15, 20 years, and you’re coming to the point where you’re selling it, when you start to say, “Oh, I’m considering selling this business”. 

What do the public and stakeholders think? Do they think, oh, maybe there’s an issue? Why is he selling up now? What do they think?

So we wanted to understand it get under the skin of what stakeholders immediately and instinctively think when an entrepreneur says they’re selling a business.

That’s really interesting. And Luke, do you have anything to add to that?

 It was quite important for us to conduct this research, because a lot of entrepreneurs and business owners may be thinking about selling their businesses, but they’re going into the process blindly and they don’t really understand how they can manage those potential risks. 

And also, most importantly, how can they communicate to the right audiences in the right way. That’s what this research looks at. So everything from how you should communicate to your employees, to suppliers, also to the wider public as well.

COVID has prompted families to reconsider the future 

Hector: And when we commissioned this piece of research, was there a particular event or something that prompted you to focus on this particular subject?

 So we’ve just come off 18 months of a quite difficult economy for some businesses. And we know that the pandemic has prompted many families and entrepreneurs to reconsider the future. And more entrepreneurs that have just gone through this stressful period, are starting to come to the conclusion that actually, they do want to sell the business now. 

There was a really interesting report from Lombard Odier in which they had a very specific statistic that put this into an evidentiary context. Because they found that up to 7 in 10 entrepreneurs were now considering selling their business now or in the future. And that prompted us to think more about this. Do entrepreneurs understand the reputational risks?

I think in many senses, the discussions that were happening between shareholders and different family members were always kicked to the bottom of the list. I think COVID and the lockdowns provided an opportunity for families to get around the dinner table and discuss the future of the business. 

And obviously on top of that year, there’s a whole question around morbidity as well. Which prompted thinking about the future and maybe the first generation shareholders or those who founded the business, are getting to an age where they’re starting to think about what they want from their life — do they want to be spending 12 to 18 hours a day running the business? Or do they want a different lifestyle? 

And I was surprised by hearing this directly from a client — who is a first-generation entrepreneur who’s held the business for the best part of 30 years. We worked with them for a long time and I could have sworn that they would keep the business in the family, but their long-term ambition now is to sell the business — that was prompted by COVID.

 That’s really interesting. Thanks, Luke, and Jordan. And for our listeners, we poll the public to collect data and sometimes we get some rather interesting results. Jordan, is there any particular piece of data that jumped out at you that surprised you?

Give a reason for why you are selling

Jordan: Maybe not surprised me, but I’ll pick one result that I think is critically important, and every entrepreneur who is considering selling needs to be aware of. 

Which is that 4 in 10 people, when they hear that an entrepreneur is selling a business, assume instinctively that the business must be in difficulty. And that’s awful, even if the business is very financially sound or even if the families had always had a long term plan to sell the business. 

Stakeholders, employees, the public, banking partners, all immediately jumped to this instinctive conclusion that this must have been prompted by a distressed event. Just to compare that on the other side, only 22% or 2 in 10 people say they wouldn’t think it’s distressed. 

So the vast majority would immediately jump to this conclusion that if the business is for sale, something is wrong.

And that’s something that entrepreneurs need to recognise as a tangible and significant concrete risk. When they’re thinking of selling the business, they need to go into it with open eyes and realise and recognise this. And it’s an uphill battle that these entrepreneurs need to work against. Because it’s not inevitable, stakeholders need to be provided with a reason to show that this isn’t a distressed sell.

 And I think that comes from if you don’t fill the vacuum or if there’s not a narrative around why you’re deciding to sell or dispose of the business, then that narrative will write itself effectively. Whether that’s internally within the business or whether that’s locally within the local community and amongst all these various different audiences. 

And unless you communicate quite clearly and also put it on the public record as to why you’re selling the business, then that vacuum fills itself. 

It has implications both on you as a shareholder who’s selling your shares within the business, but also it has implications on the business more widely — amongst customers, various different suppliers, financial partners, and so forth. 

Also, it can have an impact on the process of selling the business as well. It could potentially collapse the underlying asset value of the business. The vendor might end up walking away with less money as a result.

Write your own narrative

Hector: That’s fascinating. Because this piece of data really puts emphasis on communication. 

You could be an entrepreneur who has grown this business from nothing and you are finally at a stage where you want to reap the rewards of your hard work. And in your mind, what is quite a simple transactional process that doesn’t need justification or doesn’t need an explanation in the eyes of the public — this piece of data actually says no, you do. 

Is that right, Jordan?

 That’s absolutely right. And another way to put this is, that if you don’t give or communicate a reason, then it leads to a crisis of confidence. Suppliers, banking partners, employees all ask what’s the reason here? 

If it gets to a point where momentum builds, banks might ask for more capital or suppliers might pull supply lines. 

It could just disrupt the whole sales process. This is why we asked a subsequent question in the research. Which is, if you’re going to go through a sales process and now you recognise the need to communicate a reason, how do the public and how do stakeholders look on those different reasons. 

When you were talking there, Hector, you spoke about what I think is the most natural reason — which is retirement. And the public and stakeholders look very well on retirement. If you just say, “Guys, it’s reached the point now where I’m retiring.”, then everyone is relieved and that solves the problem.

It’s just about communication, really. And I think that was one of the key takeaway recommendations in this research was being proactive about communicating the sale of that business. Is there anything you’d like to say about that?

Communication is essential to controlling perceptions

Luke: Yeah, I think communication is key. 

I do think taking proactive steps when you actually start to think about selling the business. Because that process of sale, unless it is a distress sale, usually is one that you take maybe three or four years out from actually happening. So when you’re that individual that thinks about selling the business, be mindful of the communication risks and take communication advice on the sale process.

Communicate clearly to employees. This can be done through your employee newsletter or maybe even employee podcasts. It could also be through internal intranet systems as well. 

Also put steps in place to communicate with the wider public as well. Whether that’s a press release announcing the sale. Be sure that you get on the front foot to do that. So that you’re not just responding to a media inquiry. It’s about setting your own narrative.

And imagine that an entrepreneur is thinking or looking to sell their business, and they’re listening to this podcast right now. Or they’ve downloaded our research report and they have read through it. 

What in your mind, Jordan, is the one key takeaway recommendation that you would give to them? If they had to take one thing on board and apply it to their sale process, what would it be?

Don’t wait until it’s too late. It’s very, very simple. 

And I know that there are many entrepreneurs who may be listening to this, who may think “No, you’re absolutely right, I do need to communicate a reason. But at the moment, I’m just exploring the market. I’m just talking to some potential competitors to see if they want to buy us. I’m just speaking to KPMG or other advisors about if they can run a sales process. I’m just feeling the market.” 

These type of things leak and they leak very, very quickly. Before you know it, you’re getting a call from an industry publication, a local publication or a national publication, who are running a story on the fact that you’re looking to sell. 

Take control of the narrative and don’t wait until it’s too late. Be proactive about it and just be candid about it. There’s nothing to hide here.

Hector: T
hat’s because communicating clearly — while the sale process is happening, or even before the sale process is happening — is quite a straightforward and easy thing to do. But correcting the narrative once it’s leaked, or once there is a misconception in the public eye, is a whole different kettle of fish. And it takes a lot more work — isn’t that right?

Take proactive steps ahead of the business sale

Luke: Completely. Write the headline yourself, don’t let somebody else write it. 

And that means being first out of the gate to set the narrative. As Jordan just said, take proactive steps to communicate. 

There’s also an interesting bend to this as well, Hector. Which is, actually a lot of companies who are going through the sales process will do PR and communications throughout the process to drive the sale of the business. So there are many different ways in which you can bring in various communication techniques. 

I think the number one takeaway is don’t wait until it’s too late. Write your own headline and get on the front foot. It’s really as simple as that.

Well, thank you very much, Jordan and Luke. That’s been a really interesting discussion. 

And again, I would prompt our listeners to go to our website and take a look at our other research as well. We do some fantastic research on a variety of different topics. But also to download this one, read the research report. 

And if you do have a query or a concern or want to get in touch, email us, drop us a line and we’d be glad to help you.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.