It’s part of the job, and it’s also a big part of why we get paid to do what we do. Business brokers act as buffers – in negotiations, during buyer and seller meetings and at the closing table.
The business transaction process has a lot of moving parts, and typically involves at least a handful of people and their advisors (like brokers, CPAs and attorneys). It can be very difficult, if not occasionally impossible, to get all parties to agree on a consensus and get a deal all the way through to closing. Avoiding miscommunication, maintaining confidentiality, putting out emotional “fires” when one side has offended the other – these are part of the day to day duties of a good broker.
The reality of the business buying and selling process is that some kind of issue during the course of your transaction is probably unavoidable. You could have the greatest broker in the world and your deal might still fall apart. If you are unfortunate enough to be stuck with a not-so-great broker, then the chances of a deal getting all the way to closing successfully are probably pretty slim.
So how can you tell if your broker is doing a good job or if what is happening is truly out of their control? Let’s look at the types of things that typically happen during the course of a transaction and what your broker can (and can’t) do about it. This second article in our series? Confidentiality.
Confidentiality is a very big part of business sales, as it is the only way for a functioning business to stay in business long enough to be sold. Many bad things can happen if the sale of a business is disclosed – from the entire staff quitting, vendors and clients cancelling contracts or the competition moving in for the kill. Why? A business that is for sale is perceived to be weak or on the verge of going out of business, even though this is rarely the case. Even though most businesses for sale are far from closing the doors, it is imperative for the future of the business that the sale stays under wraps until after the sale is complete.
We give everyone the speech. We tell sellers not to tell their staff or their friends and neighbors about the business going on the market. We make all prospective buyers sign legally-binding non-disclosure agreements and tell them not to tell anyone outside the circle of the sellers, brokers and themselves anything about the business. We refuse to work with real estate agents or attorneys who are attempting to “moonlight” as business brokers because they know nothing about confidentially marketing and showing a business – we know that they will invariably disclose the business improperly.
We do all of these things, but every now and again the news of the sale of a business gets out anyway. We’ve had a chatty seller tell a woman sitting next to him on a plane all about the business he was selling – and unbeknownst to him she lived in the community where his business was located. She told all of her friends and neighbors about the business being for sale as soon as she got home, and within days the entire staff and community knew. We’ve had buyers waltz into restaurants demanding to talk to the management and get a tour during business hours when all of the staff is present, even with the looming legal penalties of a non-disclosure agreement. We’ve had real estate agents take pictures of the business and post them, with all of the confidential information they should have withheld, on the MLS system available to anyone with an internet connection.
The point here is a good broker is going to do everything in their power to keep the status of a business confidential, so if you are selling – beware the “moonlighting” broker as the consequences of disclosure can be enormous. If your business gets disclosed because of a buyer, a good broker will immediately make the necessary moves to impose the consequences of the non-disclosure. However, disclosure on the buyer side is not nearly as common as disclosure by the seller themselves. Be tight-lipped about your business sale, and if you aren’t – then you can’t really blame your broker for your lack of discretion.
Are you a seller who would like to know more about how we are able to successfully market your business while maintaining confidentiality? Are you a buyer who would like to know more about non-disclosure agreements and what they mean for your business search? Please feel free to leave us a comment or question here, and we will be happy to help.
Want to read part 1: The Bad Offer? Click here.
Want to read part 3: The Other Side? Click here.
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