Confidentiality is a big, big part of business sales.
What is confidentiality? When a business is for sale, the only people who should know that it is on the market are the seller, the business brokers and attorneys involved and qualified buyers who have signed the appropriate non-disclosure agreements. That’s it.
Most people new to the process don’t understand the importance of confidentiality. When you are buying a business, you want to know absolutely everything about the business so you can make an educated decision. When you are selling a business, you want to get the word out there so you can reach the most possible buyers. Confidentiality seems to stand in the way of those two goals, right?
It does, and it doesn’t. Sure, confidentiality makes it a little more difficult to spread the word or gather information, but there is a very big reason why confidentiality needs to be in place. Without it, a business stands to lose – a lot.
What can happen if confidentiality is breached and the for-sale status of a business gets disclosed? We’ve seen an entire staff quit and move to the competition, taking all of their regular customers with them. We’ve seen customers stop frequenting their once-favorite establishments. We’ve seen clients who are under service contracts cancel their contracts in favor of a more stable company. We’ve seen the local competition move in for the kill. Bottom line? It can be a disaster.
I signed the non-disclosure agreements and I’m not going to tell anyone, why is this such a big deal?
Here’s why. Most of the time when a business gets inappropriately disclosed it’s not because someone was shouting from the from the rooftops. A seemingly innocent conversation can derail a deal and hurt a business. Here’s an example:
A client was flying in from out of town to get a first look at a restaurant he was already very interested in buying. He had signed the appropriate non-disclosure agreements and hadn’t told anyone he knew the name of the restaurant or exactly where it was. On the plane, he strikes up a conversation with the woman sitting next to him. She tells him the name of the exclusive gated community where she lives, and he says “Hey! That’s where I’m going too! I’m thinking about buying the restaurant in that community!” She now knows that the restaurant is for sale, so when she gets off the plane a few hours later she casually mentions the conversation to a friend in the same community. “What a small world, right?” Within a few days the entire community knows about the for-sale status of the restaurant, including the restaurant staff who panic and quit en masse. This seemingly innocent conversation between complete strangers caused serious staffing issues and nightmare for both the business seller (who now has to find, hire and train almost an entirely new staff) and the buyer (who now has to take over the business without the experienced employees they were going to depend on).
The most important thing that you can do as both a buyer and a seller is keep the for-sale status of a business to yourself!
Are you a buyer who wants to know more about how you get information on a business without breaching confidentiality? Are you a seller who wants to know how you can keep your business sale a well-guarded secret? Ask us! Please leave a comment or question here, and we will be happy to help.
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