Selling a Business Confidentiality
When selling a business confidentiality is very important to most owners. The "confidentiality" question is one of the first that I get.
One of the challenges of being a business broker is that our job is to find buyers for businesses, all the while maintaining the confidentiality of our clients. In other words, our job is to get buyers interested without telling the whole world what it is we're selling. For most business owners, keeping the sale confidential is extremely important. On this page, I'm going to discuss why it is so important to keep the sale confidential and how we market businesses while maintaining that confidentiality.
Why it is Important
For most businesses, the foundation of your business is relationships. These are relationships with your employees, with your customers or clients, with your vendors and, to some extent, with your competition. When a business owner is considering selling and the aforementioned people know about it, this often times changes the nature of these relationships. Employees get nervous. Some employees may look for other employment. Customers may start to consider using a competitor's product or service. As I've mentioned before, the average time it takes for a business to sell is 6 to 18 months. During this period of time, the goal is to continue to operate your business as normal and to be as profitable as you can be.
When I'm working with a client and we have their business listed for sale, a very common question is "should I tell my employees?" This is a very natural question, as most business owners feel that their employees are family and the glue that holds their business together. Unless the employees have an ownership stake in the company, my answer is almost universally- not yet. The selling process can be a long period of time and usually it is a good idea to wait until the transaction has been completed or it is near completion. After all, it is very natural for employees to start wondering about their job security when a new owner is on the horizon. I usually recommend that once the transaction is completed, during the new-owner training phase, that the buyer and seller work together to coordinate a plan, to introduce the new owner and announce the change in ownership.
Many business owners have strong, long-lasting relationships with their vendors. Many business owners consider their vendors as friends. I would strongly recommend, however, that business owners do not disclose the fact that they are selling their business to their vendors until the transaction is completed. The term here "loose lips sink ships" applies here. Chances are if your vendor is your main supplier, they're also your competitor's supplier. As friendly as you may be with your vendor, a miscommunication could get the word out that your business is for sale.
Many businesses have friendly relationships with their competitors. Some businesses may not have friendly relationships with their competitors. It goes without saying that you should, more than likely, keep the fact that you're selling your business from your competitors. You do not want to give them the opportunity to tell their customers or your vendors that you are selling. Ironically, for many businesses, their competition may be a very viable buyer for their business. This is where the business broker comes in. As an independent third party, we can approach certain qualified competitors anonymously and see if there is an interest in an acquisition.
Customer or Clients
Many business owners are also very friendly with their customers or clients. It is also advisable to not tell your customers that you are interested in selling your business because it may plant a seed in their mind and get them thinking about what other business they may utilize for your product or service.
How we Maintain Confidentiality
The goal when we market your business is to prompt as many qualified, capable buyers into action as possible. So how do we do this without telling the world who you are? I will share with you several ways that I keep my clients' information confidential.
Firstly, all the marketing that I do is done in a blind fashion. For example, if I was selling Ron's Cigs and Suds located in Ontario, California, my marketing material would state-"general convenience store located in the Inland Empire area."
Once we receive a buyer inquiry, we have them sign a non-disclosure agreement. This agreement gives us and the business owner a legal recourse if the buyer were to harm the business by informing any parties that the business is for sale. Most serious buyers do not have any qualms about signing the non-disclosure agreement. The non-disclosure agreement also helps us screen out non-serious buyers.
I will typically qualify a buyer before I disclose to them any information about who the owner is or where the business is located. I will also strongly counsel them to not approach any employees, landlords, vendors or customers. In addition, any visit to the business' premises should be scheduled in advance with the business owner.
When you're selling your business, the goal is for you to continue to operate your business in a successful and profitable way. By maintaining your confidentiality, we can work on finding you qualified buyers and you can work on running your business.
Once your business has successfully sold, you will have the opportunity to tell everyone and anyone that you now are a retired business owner. If you would like to learn more about selling your business I would urge you to
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I look forward to speaking to you about your successful business and to continuing the discussion of "selling a business confidentiality."
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