Resources for Buying and Selling Online Businesses

Never Miss a Beat - Get Updates Direct to Your Inbox

Should You Be Cautious With Online Businesses That Employ Staff?

By Bryan O'Neil
| Reading Time: 6 minutes

If you are someone considering buying a business that employ staff, should you have any concerns? Should you be asking additional questions, or doing extra due diligence?

When someone imagines an online business, they often imagine someone sitting at the kitchen table, or in their bedroom. A one-person operation running on the barest of budgets. But many online businesses flourish and develop so fast that they are almost obligated to employ staff. Otherwise, the work would pile up, orders would go unfulfilled, and the business would stagnate as a result.

Relax, Having Employees Is OK!

Small Business with Employees

There’s absolutely nothing wrong with an online business having one or more employees. As I mentioned at the beginning, the stereotype is mostly one of a single person owning and running everything, but why should this always be the case?

Employees bring many advantages to the table, especially various different ideas, and lots of energy. Many companies literally thrive on the different personalities of their workers. And if those workers are happy workers, they are not only employees – they are also ambassadors of the company brand.

If you want a business to eventually scale into something bigger and better, you have to accept that you can never do everything by yourself. Not unless a complete mental breakdown is one of your imminent life ambitions. So welcome the staff and let them do their thing.

Employees Signal The Maturity Of a Business

When looking at the staff of a business you are interested in buying, there’s a very important thing that it signals.

It signals that they have graduated from the birth and growing pains of a boot-strapped start-up, and are now fully on their way to maturing into a well-oiled machine.

If you are a potential buyer of the company, this is the ideal sweet spot to be in. You don’t want to have to slog through tedious drudge work to get the company up and running. That work has already been done by the previous owner.

Businesses Who Employ Staff Are Less Owner-Dependent

Businesses which are affluent enough to afford staff are less dependent on their owners working there. Of course the owners should be there in a management / supervisory capacity, but overall the day-to-day operations are not totally reliant on the owner’s presence.

This is the ideal business model for a new owner. You want to be able to come in on day one and start recouping your investment with interest. If the company is already humming with staff, then your workload requirements will be less. Adopt a hands-off approach and let them get on with things. They know what they are doing.

Buying a business which is less owner-dependent also means that you don’t have to learn a lot from the outgoing owners on how to run the company. Your employees are already doing various tasks for you.

Due Diligence Items for a Business With Staff

Here on the Quiet Light blog, we have already discussed why doing due diligence is extremely important after making an offer on a business.

But when there is staff involved with that business, you do have some extra hoops to jump through, with regards to collecting important essential information about their exact roles and skill-sets, as well as the sustainability of their employment.

Does The Staff Have Any Critical Knowledge?

Does any of the staff do a particular job or possess expert knowledge that essentially keeps the company running? Identifying the key players that have the most important, most prominent positions in the company is essential to deciding if you want to own that company.

Ask The Seller To Document Standard Operating Procedures

Many key staff know how to do their jobs really well. But if they leave, could those skills be easily replicated quickly? Or would there be a steep difficult learning curve which would slow productivity down?

To avoid this situation, it is probably an excellent idea to ask the outgoing owner to write a Standard Operating Procedures (SOP) manual. This would document how to carry out each task, and can be something as simple as a quick screenshot. It doesn’t necessarily have to be a huge book.

Having this SOP manual would be your insurance policy against anyone walking out. While you look for a replacement, you can consult the manual to see how the task is done, and when someone is hired, the manual can be there for their reference.

Are They Easily Replaced?

If that staff has any critical knowledge that is essential to keeping the company running, can they theoretically be replaced if necessary, and the new staff trained quickly? Or are they essentially untouchable? Do they have long-term water-tight contracts with safeguards in place that guarantee their long-term employment in the company?

Are The Salaries Competitive, Making It Possible To Replace Them?

Having options is always better than having none. So if you are considering replacing anyone in an important position, could you offer a competitive salary and benefits package that will attract and motivate equally-qualified people to apply for the job(s)?

See If The Staff Are Happy To Continue

Of course, it is much more preferable that nobody gets fired or walks out. Because when people get fired or leave, resentment builds, lawsuits are threatened, and overall company morale drops. Plus you may have a temporary dip in productivity and therefore profits, if you have to spend money to train the new staff in their positions.

So if you can get the outgoing owner to persuade the current staff to stay on under your stewardship, then so much the better. Check to see if they are happy to stay on when the company changes hands. For many people, a job is just a way of paying the bills, and they may not care one bit about who owns the company. Others may see the change in ownership as a good thing, and something that will the company grow further, and thereby make their work more enjoyable.

Get a Full Overview Of What Everybody Is Doing BEFORE The Handover, Should The Worst Happen

Of course, the best-laid plans have the potential to go south very quickly. One of those scenarios, although unlikely, is a walkout by staff within the first 30 days of you becoming the new owner. If that happens, you will have a big headache, as you furiously scramble to hire replacements.

So to prepare for the nuclear option, do your homework before taking over the reins. Find out who each employee is, and what they do exactly. How do they fit into the overall hierarchy of the company? What qualifications would a replacement employee need if you had to quickly hire someone new?

Will The Business Still Function If Some Or All Of The Staff Decide To Leave Shortly After The Handover?

As a potential buyer who may be considering spending a lot of money on a business, you don’t want to buy something that is going to collapse instantly if the staff decide to walk out. You need to know there is a Plan B, Plan C, and Plan D with multiple backups in place.

So you need to do a critical analysis of the company’s operations and how each person contributes to those operations. Can the company survive a mass walkout? Or can it at the very least limp along on life support while you fix the damage?

Other Considerations To Remember

employ staff

There are two final things you need to bear in mind when considering a business with staff attached.

Staff Needs To Be Managed & Motivated

Earlier in the article, I said a company with staff meant that things were ticking along nicely and your workload would be lighter as a result.

However, that does not mean a total 100% hands-off approach. Staff are not slaves on a plantation while you stand idly by, watching. Staff do their best work when motivated and managed, when they see the owner investing as much time into the company as they are.

The staff of a business is always its most valuable asset, quite often an asset that can’t be defined in terms of money. Your staff quite often define you and they show clients (and potential new clients) why they should bring business to you, instead of your competitor.

So invest in them, give them ownership of their processes, and let them benefit from being a key part to your success. Because when they succeed, you succeed, and when you think about it, that is the best investment you could ever make.

Some People See a Change In Ownership As An Opportunity

Quite often, employees see the ownership change as an opportunity to ask for more money. They will recognize the transition period as being a critical sensitive period in the company, and if they are aware of the critical role they play in the business, they will leverage that to demand a salary increase.

Needless to say, this would be one of your first tests as the new owner, in terms of diplomacy, negotiation, confidence, and tact.

Look Upon Staff As A Help, Not a Hindrance

When you buy a new business, doing everything yourself is impossible. There’s simply not enough hours in the day, and you only have one pair of hands.

So don’t be scared off by the sight of staff silently appraising you as you tour your potential next acquisition. They may mean the difference between success and failure.

employ staff

Thinking of Selling Now or Later?

Get your free valuation & marketplace-readiness assessment. We’ll never push you to sell. And we’ll always be honest about whether or not selling is the right choice for you.