The Importance of Confidentiality When Selling a Business
Now that you’ve decided to sell your business, it’s important to go about maintaining your confidentiality – at least until the deal is finalized. However, it can be a challenge to negotiate towards a fat paycheck while staying tight-lipped about sensitive business details.
If you think about it, selling a business signals change. And if we know anything about people, it’s that they don’t respond all too well to change. What may appear to be a straightforward business transaction for an owner could be a disruptive event for stakeholders.
So how can you find a great buyer while protecting your confidentiality? We utilize the following actionable strategies to plan confidentiality through every step of the sales process.
1. Use Blind Advertising and No-Name Ads
When advertising your business for sale, you will have to make sure that your ad (irrespective of its form) is enticing yet generic. Don’t include any details that could help competitors and stakeholders put two and two together and figure out who you are.
This requires you to become a bit creative with your marketing and utilizing broad definitions, making approximations about the size of your business, general location, etc. It is also possible to distribute no-name ads to relevant parties. These no-name ads, since they don’t contain specific information, can contain more details about the business while leaving out the specifics.
2. Qualify the Buyer
Once you garner the interest of prospective buyers, you’ll have to make sure they pass your screening process. This can start with a friendly chat over the phone to gauge their financial capability, experience, and seriousness.
If you feel confident at the end of the conversation, you can send a confidentiality agreement.
Buyers are required to fill the confidentiality agreement and return it. If they decide not to, you can move on to other prospects. If they are not willing to take the step of signing the confidentiality agreement, this is a red flag about their intention for the enquiry.
When it is a high-value business, in addition to the confidentiality agreement, buyers may be required to demonstrate their financial capability and share their profile such as previous work experiences and motivation to buy the business. If they decide not to, you can move on to other prospects.
Note that an NDA or confidentiality agreement wouldn’t guarantee anything, but it can minimize the risk of a breach. Besides, no one wants to risk their reputation over senseless gossip. If they do talk about it and breach your confidentiality, you will have the legal right to sue them for damages.
3. Continue to Do Your Due Diligence
The closer you get to closing a deal, the higher your risk of breaching confidentiality. It is only natural for buyers to request a one on one meeting with key people in your business. This can pose an obvious risk and challenge. The deal could fall through if you don’t fulfil the prospect’s wishes.
Protecting your business’s confidentiality in such high stake situations depends on your broker’s experience.
Ultimately, it is a judgment call you have to make. Can this manager or employee be trusted to keep your information confidential? If the answer is yes, then you may be more willing to allow buyer access. However, if you have other buyers in a long queue, then it may be better to deny the request.
The example above is just one of many situations that could result in a confidentiality breach. At this stage, you will need an experienced business broker to manage the deal.
Confidentiality requires careful planning on an ongoing basis. This is why it is better to work with an experienced business broker, someone who knows the ins and outs of confidentiality. Not only can it help you maintain the highest standards of confidentiality, but it will assist you in successfully completing the sale of your business while minimizing disruption to operational processes.
Get in touch with me, the leading authority on selling businesses with confidentiality, here for more information.