Determining the Value of People Resources

DucDigital. (28 January 2009). La Salle 28/1 - chemistry lab. Retrieved from https://www.flickr.com/photos/ducdigital/3233965180/ [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Flickr

DucDigital. (28 January 2009). La Salle 28/1 – chemistry lab. Retrieved from https://www.flickr.com/photos/ducdigital/3233965180/. CC-BY-2.0, via Flickr

One major concern for a new owner will be the retention rate of employees following the sale. The more information you provide about the employees, the higher the level of comfort for the buyer.

An organizational chart depicting key employees gives a visual of the company. Microsoft has several PowerPoint templates that can be downloaded for free from their website. Templates can be found under “Diagrams.”

Providing an employee list, which documents years with the business, promotions and potential promotions would help the buyer determine the quality of the staff. A one-page summary of each employee indicating their expertise, training, education, years with the company, and current wage will support a purchase decision about one of the company’s most valuable asset—one that is not on the books.

The following are examples of the human resource activities within your business that you may wish to share with the potential buyer:

  • General personnel policies in place in the business.
  • Established programs for developing and training personnel.
  • An example of a key employee’s current job description.
  • The annual evaluation program design.
  • Expectation of employees to see wage increases or an annual performance bonus.
  • Summary of the employer-paid benefits and those partially paid by the employee.

Where a Collective Agreement is in place, a copy of that document and the implications of any change in the size of the business need to be examined. In small companies it is not likely there will be a union; however if there is a union, be sure to disclose this fact and all relevant aspects to a prospective buyer.

All of these documents will be requested at some point in the negotiations; being prepared will reinforce the professionalism in your business. In the event that the documents are out of date or non-existent, make it a point to generate current information. When you document a weakness in your company, think how to turn it into an opportunity for the buyer. This activity will help you understand your business from a buyer’s viewpoint and provide an honest, complete assessment.

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