Shh...Why Confidentiality is Critical During a Business Sale
If you’re thinking of selling your business, it’s important to maintain confidentiality during the sales process. You don’t want to tip off your competitors, customers or your employees before closing the sale. If your customers, competitors and employees find out about the sale, it could impact the value of your business.
Learning of a business sale may encourage customers to replace your product or service, employees to look for the exits and vendors to demand payment of invoices or find new sources.
Here are some tips we share with sellers on keeping a sale confidential:
Sign a confidentiality agreement — Potential buyers might be interested in reviewing your financial records, accounting and bookkeeping, business and competitor trends, vendor and employee relationships and contracts—and more. Before giving any information out, we ask potential buyers to sign a non-disclosure agreement.This legally requires the buyer to maintain confidentiality of the business information that you’ll share with them during this phase. This also weeds out tire kickers and curiosity seekers. We understand that 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.
Know what and when to share with employees—Deciding when to tell your employees about the potential business sale is tricky. We suggest you maintain total confidentiality to prevent the news from disrupting your staff. When the sale of your business is imminent, you’ll need to inform your employees about the upcoming changes. Your staff will want to know how this change impacts them both now and in the future, and early communication can help reduce workplace anxiety.
Work with a business broker — An experienced business broker will know what information to share, how to share it and when. They understand the balancing act between sharing enough information to potential buyers while maintaining confidentiality. They’ll know how to create an online business listing profile that has enough information to generate interest, without giving away the business' identity.
Selling your business can be stressful enough, and keeping confidentiality makes it that much harder. But with the right advice and a trusted professional, you’ll be well on your way. When deciding on what to tell and what not to, it’s best to proceed with caution.