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Maintaining Confidentiality Throughout the Sale Process
One of the biggest mistakes you can make when planning to sell your business is not keeping the plan secret. Staff, customers, and sellers have built relationships with you, and many people don't like change. Rumours that ownership is changing hands, can have staff looking for new jobs, sellers renegotiating contracts, and customers looking elsewhere for your services. On top of this, your competitors may take actions that could weaken your position in the market. All of this can lower the value of your business.
You may wonder how people will know you’re selling when you can’t tell anyone, but it is possible as you start to market your business. Here are the steps you can take to maintain your confidentiality.
Hide Identifying Details
This starts when you create your summary document which details all the information a potential buyer needs to know. It’s important to make this information accurate but vague. If your product is unique, don’t include the name, but do talk about what it can do. If you own intellectual property, mention this, but don’t talk in specifics. Don’t mislead, though. Buyers will see everything when it’s time for due diligence, and if they’ve received inaccurate information, it could halt the sale.
When it’s time to advertise your business for sale, speak of the business in general terms. For example, Roger’s Shoes would be listed as "A Successful High Street Retail Opportunity." Things like income, expenses, customers, and suppliers are listed in general terms. This allows potential buyers to decide if they’re interested enough to reach out for further information.
Release Information Slowly
This starts with pre-qualifying buyers. Make sure they’re serious about buying, have the funds to purchase at your asking price, and are free from conflicts of interest. If they’re qualified, it’s time to release some more information. At this stage, secrecy should still be maintained, but you can go into more detail with the potential buyer.
Have the potential buyer sign a confidentiality agreement. This will stop them from approaching your staff, clients or suppliers, and keep them from discussing the sale with anyone else. As the buyer continues to be interested, or is ready to make an offer, more information can be released. It’s possible to continue to maintain secrecy right through due diligence, depending on the nature of the business.
Use a Broker
This may seem like a lot to remember and organise, and that's an accurate assessment. This is why hiring a broker is such a good idea. A broker has the necessary experience, and knows which words to use to make your business an attractive option, while not revealing anything crucial. They also know which questions to ask to sort the serious buyers from those who are just curious or can’t afford to buy.
More than this, a broker has processes in place to ensure they keep confidentiality, meaning they won’t miss a step or slip up and endanger the secrecy of your sale. Putting your trust in an expert lets you concentrate on running your business, and leaves the details of the sale in the hands of people who are working in business sales every day.
Don’t make the mistake of underestimating the importance of confidentiality. If the wrong people discover you’re planning to sell, the value of your business could plummet, or you could find yourself not able to sell at all. As soon as you start planning to sell, take steps to keep your confidentiality by limiting the people who know to your most trusted confidants. As you move forward with your plan, engage a broker who understands when to release information to potential buyers, and who can help you balance the conflicting needs of marketing and secrecy.
Contact one of our LINK Offices and speak with our expert team of brokers to help you buy or sell a business smoothly and confidentially.