The right answer is “what do you want it to be”. This is one of the ten topics that should be covered during the sellers 10 objectives and goals.
This one is NOT to be dictated by the buyer.
A well-prepared seller should have determined and communicated to their advisor what they would like their post-closing responsibilities to be. This assumes of course that they are selling 100% of their ownership. If they are selling less, they will typically have substantial continuing responsibilities after a partial sale.
I have seen everything from a client that said “I have been here for forty years…I will give them one week” to I would love to continue in some capacity for up to five years after the sale. Both of those are clearly extremes.
The most common ones range from 90 days to one year. A big part of this depends upon how co-dependent the business is on the departing seller and how knowledgeable the buyer is about the industry that they are buying into.
There are a lot of dynamics involved with this transition.
THE BIGGEST ONE IS THAT THE SELLER IS NO LONGER THE BOSS OR OWNER. It is many times harder for a seller to work for their former company after they sell all of their stature. It is also many times very perplexing for employees.
A classic situation is the new owner changes business practices and the seller does not like it and the employees do not like it. The employees go to the seller to “fix it” and it becomes clear that not only can the seller not fix it but he or her must outwardly support the new direction.
Many former owners are miserable in this role.
Conversely, if it is a great deal between the seller and buyer and they were culturally aligned prior to the transaction, then none of these anguishing events occur and there is genuine sincere mutual cooperation and appreciation. This is a great reason why it is good for a seller to have five offers to select from so that they can select one that they will be confident in and harmonious with.
Here is an example that I really like from a very successful transaction that I did.
Six Month Transition
Months 1 – 3 seller goes to the office every day and continues in their regular role. Their replacement shadows them on a daily basis for these three months.
Months 4 – 6 sellers replacement takes over the rein’s day one of month four. Seller discontinues coming into the office at the end of the third month. The seller remains available to his or her replacement during this three-month period for offsite meetings and calls.
In some cases, the seller is paid for these six months and in some cases, it is compensated for as part of the purchase price.
I always suggest to my clients to indicate that they feel a six-month transition will be ample to lead to the buyer’s success and that they would be happy to accommodate.