Don’t Be That Guy – Why Confidentiality Is Important To Business Buyers Too



New buyers hate confidentiality.

 

We tell new buyers why confidentiality is important, but they are still frustrated by having to sign non-disclosure forms, having to wait to find out the physical location of a business and by having to visit businesses by appointment and then only after hours. We get it, it is tedious, but it is also extremely important.

 

Invariably we come across a buyer who deals with their frustration by breaking all the rules – by waltzing into a business during business hours and demanding the employees produce the owner so they can talk about the listing price, by telling their neighbors and friends what businesses they have toured – and confidentiality is suddenly out the window.

 

When you first enter the business marketplace as a buyer, the process by which you gain access to information about the businesses that are on the market might seem ridiculous at first, but those protections benefit you too.

 

When a business goes up for sale, confidentiality needs to stay in place.

 

What do we mean by that? We mean that the only people who should know that the business is for sale are the seller, the business brokers and attorneys involved and vetted buyers who have signed the appropriate non-disclosure documents. No one else should have access to that information.

 

“Why? I’m trying to make a major decision here, I need access to the business to see if I want to buy it or not.”

 

Yes, you do need access to information, and you absolutely will gain that accessbut it needs to be done carefully to maintain confidentiality.

 

What can happen if confidentiality is breached? Clients go to a competitor, employees quit and take their regular customers with them, vendors cancel contracts and the community assumes that the business is for sale because they are moments away from having to close the doors. If you are trying to buy a business, you don’t want to take the reins in the middle of this confidentiality crisis. You want the business to be in good shape and in good standing with the community the day you take over as owner.

 

An important note here – the impacts of a confidentiality breach aren’t for the business and the seller alone. If you caused the breach, you can be sure that the legal repercussions included in your non-disclosure agreements will absolutely be enforced.

 

How can a buyer ensure the health of the business they are trying to buy? Be patient, and keep the information you learn about businesses currently for sale to yourself. Don’t be “that guy” who causes severe upheaval in someone else’s business. If everyone plays by the rules, businesses stay protected and buyers end up with businesses in great shape.

 

Are you a buyer who is frustrated by confidentiality? Do you have questions about why confidentiality is so important? Please feel free to leave a comment or question here, and we would be happy to assist you with your business buying questions.

 

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


The Importance Of Customer Diversity: What Business Buyers Should Look For



When you are looking at buying a business, one aspect of any business you will need to consider is the size of the customer base. Ideally, you should look for businesses with a large number of diverse clients where each client makes up only a small portion of the total revenue.

 

Why is this important?

 

A company that has one (or just a few) large client(s) who make(s) up a very large percentage of revenue can be problematic.

 

Here’s an example. A lawn service company has a handful of independent regular clients, but the majority of their business is for a large real estate firm that has a contract with them to maintain the lawns of homes that are on the market. This one client makes up 70% of their revenue. Say you purchase this business, and then three months into ownership the real estate firm is bought out by another company who already has a lawn service contract in place. In one swift move, 70% of your revenue goes up in smoke.

 

The way to avoid this pitfall is to look for a diverse customer base when you are screening prospective businesses. Ask yourself these questions as you consider a business:

 

What does the customer list look like?

How does the business acquire new customers?

What is the cost of customer acquisition?

What kind of customer retention does the business currently have?

 

On the other hand, what if you find a business that you really like, but the customer list isn’t very diverse? Does that mean you shouldn’t buy it? No, but it does mean that creating customer diversity needs to be priority #1 the day you take over as owner.

 

Only you can decide which business is ultimately right for you and for the goals you are hoping to achieve. You just need to be aware of the inherent perils that exist when you are buying a business with a very small customer base.

 

Are you looking at buying a business, but are curious about what a diverse customer base would look like for a particular industry? Do you have concerns about a business you are already considering? Ask us! Please feel free to leave a comment or question here, and we will be happy to help.

 

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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