Selling a Business

Entrepreneurs need their own team to navigate the sales process.

Shhh! The importance of confidentiality in business sales

posted by: Brian Caldwell
Aug 30, 2018 2:10:03 PM

Selling a business is unlike selling anything else.

Very few other things need to be sold without giving the prospective buyer the specifics about what they are buying early in the buying process.  Sometimes, it makes a business broker feel like he’s the proverbial  guy in an alley selling watches from inside his trench coat….”Hey buddy, do I have a deal for you, that I can’t tell you about.”  However, adverse things can happen when people know, or think they know, that a business is for sale, so marketing a business confidentially is one of the largest services a business broker offers. 

Put yourself in these people’s shoes when they find out your business is for sale:

  1. Employees: They will get anxious of their long term stability, and may start looking elsewhere for employment.  Even though your employees are one of your strongest assets that a buyer is looking for, they wrongly believe they will be out of their job either immediately or within a couple years of being purchased.  If you lose key employees, will the buyer still be interested in your company?
  2. Customers: may lose confidence and decide to trade elsewhere. Customers look for stability, and relationships, and they have just found out that your relationship with them is not long lived.  What will service, terms, pricing, and warranties be like after the sale? Sometimes, when they leave, they leave in mass. What is your company worth without customers?
  3. Vendors / Suppliers: Your suppliers have offered you pricing and credit based on your past relationships and good payment track record with them over the years.  What impact will shorter terms or even COD have on your business?  Will they give a short term player an equal pricing discount as you have enjoyed historically?  Will you be first to have the chance at cutting edge products?  What affects can this have on your bottom line?
  4. Competition: If your competition discovers you are for sale, why wouldn’t they exploit that information to their advantage with your employees, customers, and vendors? “Hey, have you heard Joe is selling?”
  5. Lender: Lender’s like stability and dislike unknowns. The general rate of failure of small business loans keep their eye on your stability.  What is the probability of extending your line of credit at its next anniversary?  What is your negotiating leverage for the best rates?

Several businesses that have attempted to sell their business without extreme confidentiality have found they don’t have a business left to sell after word leaks out that they are “on the block”. 

Transworld Business Advisors are experts at selling businesses confidentially.

While marketing your business anonymously adds complexity, and time to the equation, it is usually essential to a successful sale.  Selling confidentially requires a network of potential buyers, confidential advertising venues, non disclosure agreements, and expertise in creating ads that will attract buyers without your closest employees, vendors, neighbors, and family knowing that it is your business for sale.

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