Khaled Azar 
Your number two just gave notice. That is the person who runs the company day to day with you, and you planned to sell next year. Talentfoot, an executive search firm, tells clients to plan for about 4 months to hire a top leader. Even once the new person starts, a buyer wants to see them do the job before paying full price.
So you have a decision to make, and there are only 3 ways to go. Sell now and accept a lower price. Ask your number two to stay a few more months, until the sale is done. Or hire the replacement first and sell later. Below, I put a timeline and a cost on each one, so you can see what each choice gives up.
What a key employee leaving before a business sale does to your price
A buyer is not paying for your company today. They are paying for the next 5 years of it, run by someone other than you.
Start with what a buyer expects to happen after closing. As our free checklist puts it, the founder usually leaves within 12 months of a sale. So the buyer needs someone who knows the customers, the team and the daily decisions, and who stays. In most small software companies, that person is your number two. When they leave, that knowledge walks out, and the company leans harder on you, the person who is about to leave too.
Buyers price that risk. Livmo’s free SaaS Sellability Checklist sets the bar buyers apply. From $2 million in yearly recurring revenue, they expect a general manager or chief operating officer who has run the business day to day for at least 6 months. From $5 million, they expect at least 12 months. The checklist’s own example shows what missing that bar costs: a $3.5 million company with the right numbers and a general manager in place can expect $10 million to $15 million. Without the general manager, buyers add an earnout, which is simply a part of the price paid later, only if the business hits agreed targets.
The usual advice at this point is a stay bonus: pay your number two to stay. Buyers know this move well. In a June 2026 study of 100 larger deals, the pay consulting firm Compensation Advisory Partners found that buyers and sellers set aside a median of 0.26% of the deal value to keep key people. In the smallest quarter of those deals, the median share was 0.49%, nearly twice as much, because keeping one person costs about the same whatever the deal size. But a stay bonus only works on someone who can be persuaded. This post is for the case where they have already decided.
If your number two has not resigned, you still have time to prevent this. Start with our guides to fixing key person risk before you go to market and reducing owner dependency before selling. The rest of this post assumes that path has closed.
3 ways forward when a key employee is leaving before a sale
Here is an illustration with round numbers, not a real deal. Say your company has $3 million in yearly recurring revenue, and a buyer would pay $12 million with a strong number two in place.
| Sell with the gap | Sell with a bridge | Rebuild, then sell | |
|---|---|---|---|
| What you do | Go to market now, with the role empty or covered by you | Your number two agrees to stay through closing and a short handover, then leaves on a set date | Hire a replacement, let them run the business, then sell |
| When you can sell | Now | Now | About 10 months from now |
| What the buyer sees | A missing leader and a founder who is leaving | A planned handover with a known end date | A leader with 2 quarters of results |
| Likely cost, in this illustration | Say the buyer moves $2 million, about 17% of the price, into a later payment tied to results | Say 6 months of your number two’s pay, for example $90,000 on a $180,000 salary, part of it paid after closing | Say a $60,000 search fee, a new salary, and 10 months in which the market or your numbers can move against you |
| Best when | You must sell soon and the role does not own revenue | Your number two leaves on good terms and will sign | You have a year, and the role holds customers or the team together |
Sell with the gap is the fastest, and the most expensive in price. The buyer cannot check a leader who does not exist, so they protect themselves with money paid later. Our guide to how earnouts work in SaaS acquisitions explains how to keep that later payment short and tied to numbers you control.
Sell with a bridge is the option most founders skip. It is not a stay bonus. You are not trying to change their mind. You are paying for a fixed end date, so the buyer gets a handover instead of a hole. Put it in writing: the end date, the duties, and the payment, with part of it paid only after closing. Someone who has decided to leave has less reason to refuse a clean, paid exit than a request to stay.
Rebuild, then sell is the slowest, and the only one that ends at full price. The next section shows why it takes about 10 months.
The 3 doors also combine. The strongest version is a bridge into a rebuild: your number two stays through the search and trains the replacement, so nobody has to cover the role, least of all you. If they will sign a bridge, ask for one long enough to overlap with the new hire.
The dollar figures in the table are assumptions for illustration, not quotes. Your own numbers depend on the role, the buyer and your company’s size.
A departure that is already decided is not a retention problem. It is a timing decision with 3 options, and each one trades time against price.
The Two Quarter Rule: what waiting actually buys
Waiting only helps if it changes what a buyer can check. I call this the Two Quarter Rule: a departure stops being a reason for a buyer to cut your price once the replacement has run the role for 2 full quarters, with results a buyer can see. That matches the 6 month bar in the checklist for a $2 million to $5 million company. Above $5 million, the checklist sets the bar at 12 months, so plan on 4 quarters instead.
Here is the timeline, counted from the day your number two gives notice.
| Months | What happens | What you will be able to show a buyer |
|---|---|---|
| 0 to 4 | Search for the replacement. Talentfoot’s 2026 benchmarks put a vice president search at 8 to 14 weeks and a top leader at 12 to 16 weeks or more. | Nothing yet |
| 4 to 7 | Quarter 1: the new leader takes over decisions, customers and the team | An org chart with their name on it |
| 7 to 10 | Quarter 2: the business runs on their decisions while you step back | 2 quarters where revenue held and the team stayed |
| 10 and after | Go to market | A leader the buyer can meet, who plans to stay |
3 things make those 2 quarters count. Revenue holds or grows. The people who reported to your old number two are still there. And the new leader makes real decisions without you. If you take back the hard calls, the clock does not count.
The sale itself then takes months more. So if your own deadline is less than about 18 months away, rebuilding will not finish in time, and the bridge is the better door.
How to choose, in 5 rules
- If the role owns revenue or your biggest customer relationships, do not sell with the gap. That is exactly the risk buyers discount most. Bridge or rebuild.
- If you must sell within 6 months, try the bridge first. If your number two will not sign, sell with the gap and keep any later payment short.
- If you have 12 months or more, rebuild. It is the only path that ends with a proven leader in the seat. Pair it with a bridge if your number two will agree.
- If you already signed a letter of intent, the signed offer from a buyer that deals call an LOI, tell the buyer now. The final agreement will include written promises about your team. Our guide to what changes between the LOI and the definitive agreement covers how those promises get written.
- Do not plan to cover the role yourself. It feels free, but it makes the company depend on you even more, and you are the other person the buyer expects to leave.
Frequently Asked Questions
Should I tell a buyer that a key employee is leaving?
Yes. If you have signed a letter of intent with a buyer, tell the buyer as soon as the departure is certain. The final purchase agreement includes written promises about your team, and a buyer who finds out later can claim money back after closing or walk away.
Does a retention bonus guarantee an employee will stay long term?
No. A retention bonus only pays someone to stay until a set date, and it rarely changes the mind of someone who has already decided to leave. For that person, a written handover with a fixed end date and a payment works better than a bonus to stay.
What is the difference between a stay bonus and a retention bonus?
The terms are often used for the same thing: money paid to an employee for staying through a sale or a set period after it. Some deals use stay bonus for the period up to closing and retention bonus for the period after. In a June 2026 study of 100 deals, Compensation Advisory Partners found a median pool of 0.26% of deal value for these payments.
How does owner dependency affect whether I can sell my business at all?
The more the business depends on you, the more a buyer moves the price into later payments or walks away. Livmo’s SaaS Sellability Checklist expects the founder to be able to leave for 1 month with no drop in revenue or service at $500,000 to $5 million in yearly recurring revenue, and for 3 months above that.
Next Steps
If your number two just gave notice, we will price all 3 options for your company: what selling now, bridging or rebuilding would mean for your sale price.