When selling a business, there are many things you need to consider and plan for. One of the most important things to be aware of is the need to maintain confidentiality. Many business owners attempting to sell their business themselves or who use someone not experienced in selling businesses, think that they should try to make a big splash, to scream from the roof tops that their business is for sale. Selling a business is not the same as selling real estate, or consumer goods. When preparing or marketing a business for sale, you want to control when the news of the sale is released. Usually, that information is not going to be released to the public until after the sale has closed and your employees and customers have been told. It is important that the information be controlled, and it is important that it be delivered to the proper parties at the proper time and in the proper manner. The aid of a skilled and experienced business broker or intermediary can be critical in helping you navigate the sale process.
Why is confidentiality so important in the selling process and why is it important to use an intermediary to help you maintain that confidentiality? As the owner you don’t want the news of an impending sale to leak before you and the buyer are ready for the news to be released. If it becomes public knowledge that your business is for sale before the proper time, there can be serious negative impacts. It can cause speculation among your customers. It can cause anxiety among your employees. It can even encourage your competition to try to target your customers. All of these can result in lost sales, disruption to your business and a significant decrease in the value of your business.
If your customers or clients discover your business is being sold through public comments or discussion, they are likely to be surprised. They will be concerned about how it affects them. It is a natural response for them to think about where they will get the goods or services they get from your business. They don’t want an interruption in service, and they have no information about what is happening to your business. The likely result is they will begin to look elsewhere for what they currently buy from you. This will reduce your sales and decrease the value of your business and make it less attractive to a buyer.
Your customers are not the only ones you have to worry about. If news of a proposed sale of your business leaks before you are ready to release it, you need to be concerned about the impact on your employees. Your employees rely on you and your business to support their families and themselves. If employees hear rumors that the business, they work for may be for sale, they will be concerned. They may be loyal and wonderful people, but they need to be concerned for their families and job stability. Speculation about what will happen to their employer and their jobs will cause some to begin looking for employment elsewhere. The result of this is your business will lose experienced employees and may even lose key employees. This makes it more difficult to meet customer demand and results in unhappy customers, a loss of sales and decreased revenue and a reduction in the value of your business. In addition, the loss of key employees is something that a buyer of the business will be concerned with and can make them reevaluate the price they are willing to pay or even if they wish to continue with the acquisition.
Your competition may also try to take advantage of the situation. Business is a competitive endeavor, and many competitors would see this as an opportunity to increase their market share by making a play for your customers. They could direct marketing toward your customers, they could play up their stability, that they are not going anywhere, or similar messages. It is quite easy for a storm of speculation among your competition, your customers, and your employees to spin out of control and have disastrous effects on the health and value of your business and any potential sale.
Using an experienced and skilled intermediary will help you maintain confidentiality and avoid the pitfalls that can arise when news of a business sale is not effectively managed. The intermediary will be the point of contact. The name of your business will not be disclosed to anyone until it is proper. The intermediary will know how to market the business and how to present the business to potential buyers in a way that will maintain confidentiality and protect information from improper disclosure. They will know what information needs to be released to a potential buyer, when to provide it, and how to provide that information in a way that protects it from being released to unauthorized parties. When it becomes time to release news of a business sale, an experienced intermediary will be able to advise and guide you. News of a sale of your business will come out at some point. But that news should be released to the right parties at the right time and be presented in the right manner.