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How to Maintain Confidentiality when Selling a Business
Many business owners have experience selling: selling their products, their services, even their ideas. But selling a business is a whole new problem, and many business owners make mistakes just because they don’t understand the intricacies involved. Not keeping confidentiality is one of those mistakes. In any other sale, you would shout about it from the top of Aoraki so that everyone knows. However, if you want to sell your business with the best price possible, it’s better to keep it to yourself.
Why is confidentiality important?
One of your biggest tasks when selling your business is to keep that business running smoothly. When people know that you’re planning to sell, they may change their behaviour. Suppliers may wish to renegotiate if they’re worried their contracts aren’t safe. Clients may go somewhere else, and your staff may look for new positions if they’re worried about a new owner. If a competitor finds out, they may use this information to build up their own business.
All of this can mean a stumble in your business’s income that prospective buyers will see when they look at your books. As business sales can take many months, this decrease in profits can be sustained and will mean a lower offer when someone is ready to buy. In some cases, this can even jeopardise your ability to sell at all.
How do you keep confidentiality?
The first step, of course, is to be careful who you tell. Clients and suppliers rarely need to know, and although there may be some staff members who must be advised, make sure they’re people you trust not to spread the news around.
When selling your business, you need to advertise it without any identifying features. Instead of Bob’s Repair Shop, for example, you market it as "Busy Car Repair Shop". Make sure you don’t include any financial or location information that could easily identify your business.
Next, when people are interested and need more information, ask them to sign a confidentiality agreement before moving forward. This is standard in the business sale process, and serious buyers expect this requirement. Even at this stage, identifying information can be obscured, with more details being released as the buyer decides to go forward.
There are some exceptions to this rule. If you have a well-known brand, revealing your business name may bring in more interest and higher offers.
Role of brokers
Working with a LINK business broker adds another layer to your confidentiality protection. Your LINK business broker acts as an intermediary, interacting with any prospective buyers. This allows your identity to remain obscured on the off-chance that someone you know is interested in buying the business. Additionally, LINK brokers are experienced in speaking about businesses in vague yet accurate terms, so they can market the business while retaining confidentiality.
LINK business brokers also pre-qualify potential buyers, ensuring they are serious and have the funds to purchase before revealing any information. The fewer people who know about your plans, the less chance there is that the news will get out.
Perhaps the biggest advantage of a LINK business broker is the experience they have in protecting sellers’ confidentiality. Because they're selling businesses all the time, they know how to obscure identifying information in advertisements and selling memorandums. They work with confidentiality agreements every day and understand them. Brokers also know how to reveal information slowly and when it’s vital to tell a prospective buyer something to secure a sale. Most importantly, they have processes and procedures in place to ensure confidentiality is maintained.
Confidentiality is one of the most important aspects of your sale. Many business owners who are selling a business for the first time aren't aware of how essential it is in order to achieve a good price and closing a sale. Make sure you keep the sale a secret and look for help from experienced business brokers to maintain confidentiality throughout the sales process.