Key staff not tied in

Once the owner steps back, a few people usually hold the business together: the operations manager who knows every supplier, the developer who understands the code, the senior technician customers ask for by name. If they leave soon after the sale, or leave to compete, you can lose revenue, skills and customer confidence at the same time.

No contract removes this risk entirely, because people can always resign. What matters is whether anything encourages key staff to stay and limits the damage if they go: written employment contracts, sensible notice periods, confidentiality terms, restrictive covenants where local law allows them, and pay in line with the market. Many small businesses have none of these and rely on loyalty to the owner instead. That loyalty does not pass to you automatically.

The structure of the deal also matters. In a share sale the employer stays the same. In an asset sale the position depends on the country. In the UK, TUPE usually moves employees to the buyer on their existing terms, and some other countries have similar rules. Where no such rule applies, staff need new contracts with the buyer, which gives each of them a moment to reconsider. Whether restrictive covenants can be enforced varies widely between countries and, in the US, between states, so take advice from an employment lawyer where the business operates.

This is usually fixable. Common responses are to meet key people before completion (closing in the US), agree retention bonuses paid over the first year or two, offer updated contracts, and in some deals make signed terms with named staff a condition of completion.

• The listing mentions an experienced team but gives no roles, tenure or headcount by function.
• Key people work on verbal arrangements, old offer letters or contractor terms.
• One or two important employees are paid well below the market, which makes them easy to recruit away.
• The owner has promised bonuses, a share of the sale or a future stake informally.
• Experienced staff have left in the last two years, some to competitors or to set up on their own.
• A key employee is close to retirement, or has talked about leaving or starting a business of their own.

• Who are the three people the business would struggle most to lose, and why?
• Do they have written contracts, and what notice periods and restrictive covenants apply?
• Have you promised anyone a bonus, a share of the sale proceeds or a future role?
• Has anyone important left in the last two years, and where did they go?
• When and how do you plan to tell key staff about the sale?
• Would you fund, or share the cost of, retention bonuses for key staff?

• Employment contracts and offer letters for key staff
• A staff list with role, start date, pay, benefits, notice period and employment status
• Details of every bonus, commission, profit share or equity arrangement, including informal promises confirmed in writing
• Staff turnover and reasons for leaving over the last three years
• Agreements with former employees, including settlement agreements and restrictive covenants
• Details of any grievances, disputes or employment claims, current or threatened