As a business seller with a business on the market, you can feel at times like you are constantly having to reveal the world to complete strangers, an uncomfortable feeling at best.
When you accept an offer from a potential buyer, be prepared. The stage you will enter at this point is known as due diligence, and it is a buyer’s chance to pull back the curtain and really get to know the business from the inside out before they decide to buy it.
This part of the process can be unnerving for a seller, as this buyer will have access to all kinds of financial records like tax returns and contracts, and in some cases client lists and key employees. To get your business sold, you will need to give a buyer access to the information that is going to make them feel like your business is the right choice.
This part of the sales process can be uncomfortable, but there are a few things you can do to ease your discomfort with exposing so much information. First, discuss your apprehensions with your business broker. They will be best equipped to answer your questions about information disclosure.
Next, you can work with your broker to set up stages of disclosure (if your type of business permits this kind of set up) where a potential buyer can have access to less confidential information first, then (if they decide to go ahead with the deal at each step), they can see more delicate information, like a client list. This way, if the buyer decides to pull out at an early stage, they haven’t seen your most confidential business material.
In some cases, at the end of due diligence the buyer will decide for whatever reason not to go through with the deal. What can you do about this person who now knows absolutely everything about the inner workings of your business?
Well, for starters anyone who gets to the due diligence phase has long since signed what is known as a non-disclosure agreement. This agreement allows you as the seller to take legal action against this former potential buyer if they disclose any information about your business that they weren’t supposed to. The non-disclosure agreement process also allows you as a seller to define individuals you don’t want to disclose to – like a competitor, for example. Be sure to discuss the non-disclosure agreement process with your broker if you are at all uncomfortable.
Are you a business seller who is completely uncomfortable with disclosing your business information to a person who may not even buy it? Do you have questions about the legal protections a non-disclosure agreement can give you? Ask us! Please leave us a comment or question and we will be happy to help.
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