Importance of Keeping your Business Sale Confidential

confidential business agreement

Selling a business is a fairly complicated process, and there are a lot of important steps that need to be taken to ensure a smooth and successful transaction. First and foremost, you need to be well prepared with organized and detailed information that will help prospective buyers obtain a good understanding of your business, and to know whether it would be a good investment for them. Just as importantly, you also need to take steps to ensure confidentiality during the sales process.

Why is confidentiality so important? You probably already understand a lot of this intuitively, but let us spell out some reasons.

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Maintain Employee Morale

The last thing you want is for an employee to find out that your business is for sale before it is time to announce it. If word gets out to even one employee, it can travel quickly through the entire staff. This will send rumors swirling around and employees will start speculating endlessly about their future. Ultimately, this can result in poor performance, poor customer service, and early attrition.

Keep your Client/Customer Base Loyal

What if an employee or someone else leaks the news of your business sale to a customer? In the age of social media, word can travel fast and before you know it, the entire community might be aware that your business is up for sale. This, again, could fuel speculation about the quality of your product/service and cause you to lose customers or clients.

Keep Competitors from Finding Out

Some businesses and industries are highly competitive; and if competitors find out that your business is up for sale, they might develop strategies to steal your clients or customers away from you by sowing doubt in their minds about your future.

Keep Vendors from Becoming Anxious

If some of your vendors get word that you are selling, they might wonder whether they will be able to continue doing business with the new owner. This could cause them to start looking elsewhere to form new business relationships.

Any of the above-mentioned outcomes could do tremendous damage to your business and make it far more difficult to sell. So, if you are entering into the business sale on your own, keeping it confidential will need to be among your highest priorities. Toward that end, here are some general guidelines that you should follow:

  • When you create your business profile to send to interested prospects, include enough details to attract interest, but be sure that it is also generic enough to protect your confidentiality.
  • When advertising the business for sale, use blind ads with contact information that is not connected to you or your business (e.g., separate email account, separate phone number, PO Box for a mailing address, etc.)
  • Create an ironclad confidentiality agreement for prospective buyers to sign. It would be a very good idea to have an attorney draft this for you.
  • Never provide your offering memorandum (your detailed profile of the business that includes historical financials, projected financials, business history, and a full description of the business) to anyone who has not signed your confidentiality agreement and been prequalified to take the next steps in the process.
  • Never hold meetings with prospective buyers during business hours at your place of business. If they want to see it, arrange a time after hours or on weekends to meet.
  • Involve as few people as possible in the business sale process, and make sure that you can fully trust whoever you have involved.

Consider a Business Broker to Handle Your Sale

If the idea of selling a business on your own with the confidentiality and everything else involved seems overwhelming, you should strongly consider bringing in a professional to assist you. CPA firm business brokers, also known as business intermediaries, thoroughly understand the complexities involved with the sale of a business, and they can work hand-in-hand with you to make all of the necessary preparations ahead of time, ensure that everything stays confidential until the appropriate time, and help bring the transaction to a successful conclusion.

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