Shush, I’m Selling My Business
When it comes to selling your business, keeping it quiet and confidential is essential. Once you make the decision you’re selling, it’s vital to tell as few people as possible. Your professional Deal Team: your accountant, financial advisor, attorney and business broker each understand the importance of maintaining confidentiality. However, even your friends and family may not understand the implications of others discovering your business is being sold.
So why is confidentiality so important? Not knowing the real story can cause people to jump to conclusions. They might assume partnership troubles, bankruptcy, severe illness, or divorce. The next thing you know, rumors are flying around about you and your business that have no basis in fact.
Here are five very good reasons to keep your sale confidential:
1. Customers: Customers like predictability and may become nervous if they hear rumors your business is for sale. Some customers may feel a loss of relationship when they hear you will be leaving your business and may feel it’s a good time to change providers.
2. Employees: When employees hear your business might be for sale they get scared for their future. Will they be losing their job? Will there be a pay cut? Who will the new owner be and will they like working for them? Buyers don’t want to purchase a business where employees are jumping ship. Keeping as many people on board is important to a smooth ownership transition.
3. Competitors: Hiring your best employees or taking your best customers is to your competitors’ advantage. If your competition hears rumors your business is for sale, they may swoop in to create doubt in the minds of your customers and employees. Concerned customers and employees are low hanging fruit for competitors looking for top dollars and top talent.
4. Vendors: If you have key relationships with vendors who hear rumors you’re selling, it could minimize your ability to maintain key agreements and pricing or inventory levels that make it easier for your business to operate.
5. Your Business: While your business is for sale it needs to continue to grow and prosper. If you’re losing customers, it means you’re losing revenue. If your employees become concerned about their job security they won’t be as productive, or they may even leave. Retaining top talent is important to future buyers.
How do you maintain confidentiality when your business is for sale?
- Go to market with Blind Advertising. The name and location of your business should not be advertised publicly.
- Qualify all interested Buyers. Prior to sharing the confidential information of your business, every buyer should be thoroughly qualified. It’s important to discover if they have the background, qualifications and financial means to purchase your business.
- Confidentiality Agreements. All qualified buyers should sign a confidentiality and non-disclosure agreement. Such agreements require qualified buyers to not disclose your business is for sale, and to hold all information they get about your business confidential.
Have a Plan. Have a plan for how you will respond if asked “Is your business for sale?” As the sale process moves forward, more people will be aware of it, including those associated with your attorney, financial advisor, accountant, banker, interested buyers, family members you’ve told, etc. While all parties involved should observe strict confidentiality, there is a chance - intentionally or unintentionally - information may slip out. It’s advisable to devise a contingency plan for how to handle questions that might arise if someone asks you about the sale prior to your releasing that information.
If someone tells you they “heard” your business is for sale, consider asking them what they heard and who they heard it from. Begin by answering their question with a question, such as; “interesting, what did you hear?”, or “really, how much am I selling for and who’s making the offer?”, or “my business is always for sale for the right price, are you making an offer?” You’ll be better prepared to respond if you know the depth of their knowledge and their source. Be cautious about being untruthful but be guarded about how much information you share. In some instances, you may simply let them know that selling the business is something you’ve given serious consideration to.
Create a communication plan to inform your employees, customers and vendors that your business has a new owner. Consider key customer relationships and make sure your plan includes personal introductions. Work with your buyer on the best way to retain customers and employees through the transition as well as when and how you want to make the big announcement.