For most business owners, selling a business confidentially should be the only way to sell it. If you own a famous landmark or establishment, a public sale could definitely benefit you, but otherwise, it will almost certainly hurt you. A business can be affected negatively if employees, competitors, creditors, vendors or customers discover that it is for sale. Most of the people connected to the business will feel uneasy about an uncertain future, while competitors will be looking to prey on its customers or company secrets. Maintaining confidentiality can be an intricate balancing act, but experienced business brokers have the tools and the knowledge to do it properly. However, if you are committed selling a business on your own, there are a few things you can do to keep the knowledge of the sale private.
The first step in protecting yourself and the confidentiality of your business is to prepare a Non-Disclosure Agreement (NDA). Business brokers have a standard agreement that all interested buyers must sign, before getting even basic information about a business for sale listing. The agreement should not include any identifying details or specifics about the business, should ensure a confidentiality clause from both parties, and have an expiration date. If you don’t use a broker, get advice from an attorney about what to put in the NDA. Just keep in mind that a lawyer will charge by the hour for everything you use them for throughout the sale process, while a business broker only charges a commission from the sale.
One of the reasons why business brokers are so good at confidential marketing is that they know how to make blind advertisements for a business sale, so that the ad is enticing enough, but the seller’s information is not revealed. They know all of the best avenues for advertising and marketing your business. When doing blind advertising on your own, do not use any revealing contact information. Use a phone number and email address that are not linked to the business. For the title of the listing, highlight the business’s strengths instead of its name.
A lot of buyers might just want to ‘kick the tires’ on your business, and may not be very serious about buying it. Many of them could be competitors fishing for more information to compare their business to. Screen potential buyers by asking them about their intentions and qualifications. Engage them in back-and-forth communication to try and learn as much as you can about their background, what they are looking for in a business, and how they are qualified to purchase it. Coming up with a list of predetermined questions will help to interview each buyer. You may find that a lot of them drop out after a round or two of questions, while more serious ones will stay engaged. Understand that qualified buyers are expecting to be screened and would prefer that the details of the business are not easily divulged, because that protects the future health of the business they are looking to buy.
Even after screening buyers, a seller should not be ready to hand over just any piece of information about their business by request. Disclose information in phases, gradually getting more detailed. Start by giving the buyer a selling memorandum, describing the business and why it’s a good investment. Remind them in writing that the memorandum is bound by the terms of your confidentiality agreement. Do not disclose proprietary information about the business, such as customer lists or trade secrets until the buyer has proven that they are financial qualified to purchase the business and are ready to make a serious offer.
When meeting with prospective buyers about the sale of your business, try to keep things as discreet as possible, so that your staff or other people related to the business do not find out about a potential sale too early in the process. Hold off-site meetings, and try to involve as few people as possible. If you need to involve other personnel, make sure they are clear about the importance of discretion and confidentiality and the detriment of the sale becoming public knowledge.
Although the guidelines to selling a business confidentially may not seem to be that hard to follow, many sellers learn the hard way that they are much easier to understand than to practice. Selling a business could occupy a significant portion of your time and effort, leaving much less available for handling daily operations. Business owners who are inexperienced at selling on their own run into a lot of obstacles and pitfalls while trying to keep it a secret. Some of these may include being unable to find enough buyers, mishandling competitors, revealing information about the business at the wrong time, lacking negotiating power and leaving money on the table. Maintaining confidentiality while trying to sell a company is an intricate process in which experience can make a big difference.
A business broker has a process for selling businesses confidentially. They have tons of leads for potential buyers already looking for businesses to buy, and know where to find more. Brokers have a screening process they go through to weed out competitors and casual inquiries. They also have experience negotiating prices and terms, which can help ensure you get the most money out of the sale of your business. In essence, they are a buffer between your business and its potential suitors, making sure you are protected and the sale process is as easy as possible for you.
While it is not impossible to sell your own business confidentially, it can be extremely difficult. As with anything, understanding the process is much different from actually having to do it. In addition, business sales can take a long time, and having to endure the buyer vetting process repeatedly while you search for the right one can be aggravating. The longer the process takes, the more prone you will be to making a costly mistake and the more likely you will end up settling for less money. Hiring a professional to sell your business could end up making you a lot more money in the long run.
If you are a Southwest Florida business owner and would like to get more information on selling a business while also keeping it a secret, contact CIBB. We will provide you will a free consultation and business valuation so that you can decide if selling is the right move for you.
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