Watch the full webinar: Missed Preparing Your Business for Sale: The HR and Legal Steps That Protect Value? Watch the full recording to hear the complete conversation between Clint Parry of Focus HR and business attorney and M&A adviser Mick McGirr of Phocus Law.
Selling a business is not simply a matter of finding the right buyer or reaching an EBITDA target. Buyers, lenders and advisers also want confidence that the business can continue to operate, retain key people and withstand scrutiny when the owner steps away.
That was the focus of a recent conversation between Clint Parry, MBA, SHRM-SCP, of Focus HR, powered by OneDigital, and Michael J. “Mick” McGirr, attorney and founder of Phocus Law. They explored the HR, legal and operational details that can quietly affect buyer confidence, deal terms and a business owner’s ability to exit on their own timeline.
Below are several of the most useful takeaways from the webinar for owners considering a sale, succession or transition in the next one to five years.
A buyer is evaluating the future, not just the current numbers
A business can have strong revenue and healthy profitability, but still raise questions if its value depends too heavily on one person.
As Mick explained during the webinar, a buyer is not only asking, “What is the business worth today?” They are also asking whether the value will still be there after the seller hands over the keys.
Consider two businesses with comparable revenue, EBITDA and market position. In the first, the owner manages the largest customer relationships, approves every major decision, holds the vendor knowledge and generates most referrals. In the second, the sales team owns customer relationships, management runs operations, contracts are organized and processes are documented.
They may look similar in a spreadsheet, but they are not the same asset. The second business is usually easier for a buyer to understand, operate and trust because its value is less dependent on one individual.
Mick explains why two businesses with the same revenue and EBITDA can still be very different assets to a buyer.
Ask the 90-day question
One of the most practical questions in the webinar was also one of the simplest:
If the owner stopped working for 90 days, who would keep the business running?
Who would maintain the key client relationships? Who would make decisions? Where does critical operational knowledge live? Would payroll, finance, customer service, production or business development continue without the owner’s daily involvement?
This is not only an exit-planning question. It is a business-resilience question.
If the honest answer is that too much would pause, depend on a family member or require the owner to stay plugged in, that is useful information. It points to the systems, people and responsibilities that need more structure before a transition becomes urgent.
A quick self-assessment for any owner: could the business keep moving if you stepped away?
Organized records help build trust in diligence
Due diligence is not simply a document request. It is one of the first opportunities for a prospective buyer to see how a business is run.
Mick compared the process to buying a used car. If the seller cannot produce maintenance records, receipts or service history, the buyer naturally asks more questions and may discount the price to account for uncertainty. When the seller can show a clear record of care, the buyer has more confidence in what they are purchasing.
The same principle applies to a business. Buyers expect to see a clear, current picture of key agreements, corporate records, employment documents, financial information, policies and operating processes. If those materials are scattered across laptops, outdated folders or individual employees’ memories, the buyer may see more risk than the owner realizes.
That does not mean a business needs to be perfect before it can be sold. It does mean that owners should make it easier to understand what exists, who owns it and how it is maintained.
Why organized records can change a buyer’s confidence before negotiations even begin.
HR details can become deal questions
Some of the most consequential issues in a transaction are not always visible in a company’s top-line financials. They can sit in employment practices, payroll processes, personnel records and benefit administration.
During the webinar, Clint highlighted several areas that owners should review well before a sale process begins:
- Worker classification. Are employees and independent contractors classified appropriately? Are exempt and non-exempt roles reviewed carefully?
- Payroll and wage-hour practices. Are payroll tax filings, timekeeping and wage practices consistent and well documented?
- Accrued paid time off. Has the business identified unused PTO or other employee-related obligations that may need to be addressed at closing?
- Personnel files and employment records. Are job descriptions, I-9s, withholding forms, agreements and other required documents complete and accessible?
- Benefits and retirement-plan administration. Are benefit programs and related compliance responsibilities being managed consistently?
These are not reasons to panic. They are reasons to take stock while there is time to identify facts, make sensible corrections and create a credible record of the work that has been done.
Mick’s practical point was especially important: a buyer does not necessarily need to find an actual claim to become concerned. The possibility of an unresolved risk can affect how a buyer structures protections, such as holdbacks, indemnities or transition requirements.
Retention planning is part of protecting continuity
A buyer is not only buying assets and contracts. They are also buying the capability of the team that serves customers, manages operations and holds institutional knowledge.
That is why identifying critical people early matters. The most important employee is not always the person with the biggest title. It might be the long-tenured technician who maintains essential equipment, the manager who understands a key process, the employee who holds a licensing requirement or the team member who knows how a major customer relationship actually works.
Owners should consider:
- Which people have the greatest impact on revenue, customer continuity, operational knowledge and buyer confidence?
- What would happen if they left during a transition?
- What communication, development and retention approach would help them stay engaged?
- Is there an appropriate plan for a stay bonus, transition incentive or another retention structure?
Retention is not only about compensation. Clear communication, a credible plan and thoughtful leadership also matter, especially when employees are navigating uncertainty.
Give yourself more runway than you think you need
The strongest theme of the webinar was that readiness is built over time.
A business cannot usually reduce owner dependency, organize its records, strengthen management practices and resolve HR or legal gaps in a few weeks. In many cases, credible improvements need time to take hold. A buyer is more likely to have confidence in a process that has been operating consistently than in a change made at the last minute.
That is why preparation should begin before a buyer appears. Owners who begin early have more options, more control over timing and more opportunity to build a business that is easier to transfer.
As Mick put it, buyers are not buying perfection. They are buying predictability.
The goal is not perfection. It is a business that can keep operating predictably when the owner is not in the room.
A practical starting point for owners
If a sale, succession or ownership transition may be in your future, start with a focused readiness conversation. You do not have to solve every issue at once. A useful first step is to understand where the business is strong, where risk is concentrated and what work should take priority.
Focus HR can help owners assess the people, payroll, compliance and operational side of their HR house, while the right legal, tax and M&A advisers can help address the transaction-specific questions that follow.
Considering a sale or transition?
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