Buying a business is a big task, and there are many steps ahead of you that might seem ridiculous – but all are a necessary part of a successful business transaction.
The most important of these steps is the signing of confidentiality agreements and then keeping that confidentiality in place.
This can be a frustrating part of the process for buyers. The confidential nature of business sales means you can’t have all of the information you want the moment you want it – and you will have to sign non-disclosure agreements for each and every business you seriously consider, all without knowing very much about the business before you do.
Keeping the for-sale status of a business a closely-guarded secret is absolutely imperative for the health (and possibly survival) of the business. When people find out a business is for sale, they immediately assume the worst. A business for sale must be a business on the brink of ruin. Why would anyone sell a perfectly good business?
Well, there are a lot of reasons. Reaching retirement age, the desire to move to a new area, wanting to pursue a different business venture, reaching a pre-planned goal within a business initially purchased for the purpose growth and then a sale – all of these reasons mean a business is healthy, not failing.
In general, however, that false perception that a business for sale is a failing business can cause an enormous amount of havoc in an operating business. The entire staff can quit, customers can go elsewhere, contracts can be cancelled – all things that can severely affect the bottom line.
For you as a buyer, the confidential nature of business sales means you must sign non-disclosure agreements and you must abide by them. Period.
You can’t change the language of the agreement to remove the penalties for you if you break the agreement. Non-disclosure agreements come in a standard form used throughout the industry and are not open for negotiation. If buyers could change the agreement to remove the penalties for a disclosure, then there really isn’t any point in having non-disclosure agreements in the first place.
You also can’t tell anyone who is outside of the transaction that the business is for sale (like your mother-in-law, your neighbor, your golf buddies, etc.). The only people who should have access to any confidential information is the buyer, the seller, the brokers, CPAs and attorneys involved.
While the confidential nature of business sales might seem like a giant pain – you should consider it a great thing for you as a business buyer. Confidentiality means that the business you want to buy hasn’t been trashed by the careless disclosure of it’s for-sale status by a buyer that considered it before you did. You will get your new business intact and healthy.
Do you have questions about non-disclosure agreements or questions about the business buying process in general? Please feel free to contact us here or comment below. We would be happy to answer any questions you might have.
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