Salary Increases & Stay Bonuses - Advice Please

May 05, 2025

by a searcher from Northwestern University - Kellogg School of Management in Sammamish, WA, USA

I'm in the process of acquiring a small business, and the current owner (mis)communicated to the current team (2 FT, 1 PT employees) that they'd be getting a pay increase at close. While I was considering this, it was never formally agreed upon and I had also been thinking about the potential of a stay bonus. I'm in a sticky situation given the expectation set by the current owner. I'd love to hear from others who’ve navigated this and/or have general advice. Did you offer raises right at close? Did you use stay bonuses to support retention? How did you communicate the decision if expectations were already set? Appreciate any insight on what worked (or didn’t) for you!

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Reply by a professional
from Duke University in Windermere, FL 34786, USA

I’ve seen a few clients deal with this exact issue, and it’s always a little awkward when the seller sets an expectation that wasn’t part of the deal terms. Here’s what’s worked in those situations: 1. Raises at Close Most buyers I work with don’t give raises right at close unless there’s a compelling reason (like clear under-market comp or retention risk). But if expectations were already set (especially verbally by the seller) I've seen buyers offer a small increase (say 3-5%) just to keep the peace, and then frame it as a “starting point” with a more thorough comp review in 90 days. That way you’re not totally blowing up the expectation, but you’re also not locking yourself in long-term without knowing what you’re working with. 2. Stay Bonuses Definitely seen success here. A simple “if you stay 6 months, you get $X” bonus helps smooth the transition and keeps things steady. One client structured it in two parts: 50% at 6 months, 50% at 12. That worked well and made it clear it wasn’t just a handout, it was tied to loyalty and helping with the transition. 3. How to Communicate It Honesty goes a long way. I’ve seen buyers do well just owning it directly: “Hey, I know there was some talk about raises. That wasn’t something we agreed to, but I do want to recognize the team and keep things stable. Here’s what we’re thinking short-term, and we’ll re-evaluate once we’ve had time to really dig in.” You don’t want to come in swinging the hammer on Day 1, but you also don’t want to get steamrolled into promises that were never actually made.

Reply by a searcher
from Oklahoma City University in Oklahoma City, OK, USA

This is definitely a tough predicament, and I really feel for you—especially when expectations are misaligned before you’ve even officially stepped in. That said, I believe this kind of situation can actually become a trust-building opportunity if it’s handled with honesty and care. One thing I’ve learned in leadership and working with people: when conversations get hard, people often mess them up. They overpromise out of fear. They say yes to things they didn’t fully process. And yes—sometimes they just lie. That’s why the first step is C—Clarity. Slow things down and clarify what was actually said, promised, or implied. Was a raise clearly communicated? Or was it inferred through vague or hopeful language? That matters. If we move too quickly to “solve” a problem that isn’t fully understood, we risk solving the wrong one—and creating more confusion in the process. Stay solution-minded and forward-focused. Don’t get stuck trying to untangle every word from the past. Instead, focus on reframing the path forward in a way that creates clarity, accountability, and shared success. And from here, you have a huge opportunity. In my experience building high-performing teams and improving team effectiveness, I’ve seen this truth play out over and over: When people understand what success looks like—and how they’ll be rewarded for it—you’ll start to see a mindset shift. It’s something that can be coached and reinforced, but even without formal training, many team members will start finding their own way forward when they know what “winning” looks like. They’ll: • Speak up more • Raise their hand with ideas • Even complain more—which isn’t always a bad thing. That feedback helps you identify what’s really in the way. So here’s what I’d recommend: • Have the crucial conversations. Be honest and transparent. Let them know you’re evaluating compensation with intentionality and fairness. • Define success and align rewards. This is your chance to put in place a bonus or incentive structure that’s directly tied to: • 1–3 key metrics (not 15) • Clear business outcomes • Individual ownership and accountability • Make it collaborative. Invite your team into the conversation about what motivates them. What’s worked before? What hasn’t? This builds buy-in and ensures the plan actually fits your culture. • Avoid two common traps: • Building a structure that’s unrealistic and demotivating • Rolling out a plan that’s vague or disconnected from real results A phrase I often use in these moments: “I want you to win here—with me. But in order to do that, we need to define what winning looks like, and how we get there—together.” And here’s the thing: once success is clearly defined, tracked, and reinforced, two things will happen: 1. The right people will rise and thrive. 2. The wrong ones will self-select out—which is ultimately a good thing. This moment is a gift. Don’t rush past it. Use it to reset the foundation in a way that creates clarity, trust, and healthy performance from day one. You’ve got this—ping me if you need to brainstorm.

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