If you are selling your business you probably know how damaging it can be if your staff, customers or frankly anyone finds out that the business is on the market.
Employees can panic and quit en masse, taking their regulars with them. Customers can stop coming in, worried about how much the business might change under new ownership. The community at large might think you’re selling to get yourself clear of a sinking ship (as the misconception that a business for sale is a business on the brink is both pervasive and in the vast majority of cases – false).
While your business is for sale maintaining confidentiality is paramount, but not just in terms of the for-sale status. There are parts of your business that a buyer will need to see – your tax returns, your employee records, your vendor contracts, your client contracts and the like that are also critically important. Your business records and proprietary information need to stay confidential too.
That’s why it’s a good idea to hire the right help – a business broker. Business brokers are able to safely and confidentially market your business to buyers, at first through a purposefully vague listing and then only disclosing any identifying information after a prospective buyer has signed the appropriate non-disclosure agreement (NDA). The NDA also protects the records and information a buyer will have access to from disclosure so you don’t need to worry about confidential information ending up in the wrong hands.
While your business broker and buyers who have signed the NDA do their part to keep the confidentiality of your business transaction in place, you as a seller also need to be careful so you don’t burst your own confidentiality bubble. It happens more than it should, and often it’s the product of an seemingly innocent conversation.
Here’s an example. A business seller flies to see their parents on vacation, and while on the plane headed out of state they strike up a conversation with the person sitting next to them. The conversation turns, as it often does, to what you do for a living. The seller tells this stranger that he owns a waterfront restaurant that he’s currently selling. Later in the conversation he lets slip that this restaurant is in a specific community, one where there’s only one waterfront restaurant. Unbeknownst to the seller, this casual stranger not only lives in this community, they’re very involved in the community’s social scene and have many friends who frequent his restaurant. As soon as the plane lands, the gossip begins, as phone calls to friends include “did you hear the restaurant is for sale?” By the time the seller is on his return flight the damage is done and the entire community knows about his for-sale status.
The point here is you wouldn’t carry around a copy of your business tax returns to show every stranger you meet, so you need to work just as hard as your broker and the buyers who sign the NDA to keep your for-sale status under wraps. Don’t tell strangers, don’t tell your friends, don’t tell your neighbors – you get the idea.
Are you considering selling your business and hadn’t thought about how important confidentiality is? Would you like to know more about how we market your business while maintaining confidentiality? Ask us! Leave any questions or comments and we would be happy to help.