When selling your company, it is crucial for the health of the business and its future that the sale remain confidential. If your customers, vendors or employees learn it is for sale, it could have a negative impact on value. Learning of a business sale may encourage customers to replace your product or service, employees to look for more secure employment, and vendors to demand payment of invoices. If the value of your business is impacted, you will lose negotiating power with buyers and will not get the highest and best offer for it. One way to protect the confidentiality during the sales process is to work with a business advisor, who will work on your behalf, use best practices, and allow you to continue to run your business. Here are some tips we share with sellers on keeping a sale confidential.
1. Don't mention the name of the business in the listing
There is a balancing act in getting your business information in the hands of qualified buyers while maintaining confidentiality. Our first suggestion is to use a "blind listing". Create an online business listing profile that has enough information to generate interest, without giving away the business' identity . Buyers want to know the industry, business description, size, sales price, cash flow, general location, number of employees and whether or not the sale includes real estate. While building out your listing, try to put yourself in the position of a prospective buyer and ask yourself whether certain details would expose your business's identity. Transworld's collection of searchable listings offer good examples of blind listings.
2. Work with a Business Advisor
As with other strategies for maintaining confidentiality when selling your business, working with a business advisor can not only help you maintain confidentiality, it will help you position your business in the best possible light for the highest and best offer. Business advisors typically act as a central hub for buyers, offering multiple listings buyers can browse, ensuring sellers get the exposure to qualified buyers while maintaining confidentiality. Business advisors also work with hundreds of buyers that may not regularly search the listing sites, so can suggest your business to the right ones.
3. Qualify prospective buyers
Does the buyer have experience in your industry? Can they get financing? Do they have money to put down? What is the buyer's goal? Are they serious or just curious? In order to sell your business quietly and quickly, it is important to get the information to the right buyers. Sharing information with more people than necessary isn't helpful. Transworld Minnesota limits the amount of information given to prospective buyers by sharing it in stages behind password protected portals. By sharing information in stages, it helps weed out those that are just curious. If a buyer clearly cannot afford to purchase your business, there is no need to take the next step of sharing more information or revealing the business' identity.
4. Use a confidentiality agreement
A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a legal document buyers must sign before learning the business name. This critical document outlines your terms of confidentiality in detail, ensuring that prospective buyers who sign it will not reveal your intent to sell or any other sensitive information related to your business. Working with an experienced business advisor will ensure that you go into negotiations with a carefully crafted confidentiality agreement.
5. Knowing when and how much, information to provide
There are stages to every transaction and it is crucial to give out limited information at each stage. As a buyer goes through the purchase process, they will ask questions about the business. Knowing which questions to answer and which to put off is very important for the seller. We suggest answering questions pertinent to a buying decision, but save answers that will give too much of the business' process and procedure away too soon. Business owners often like to talk about their business because they are proud of their accomplishments, but sharing too much too soon could hurt their ability to negotiate. Often times the most sensitive information will not be disclosed until the due diligence stage, once a contract has been negotiated and signed. In extreme cases, some information can be held to post-closing, such as customer names.
Contact a Business Advisor
In order to utilize these tips conveniently and effectively, contact a business advisor. Business advisors like Transworld, which maintains one of the strictest privacy policies in the business, will keep your sale confidential at every step, offer the utmost expertise in valuing your business, and ensure that you get the best price possible.