How to sell a business and maintain confidentiality? We thought you would ask…
What if we posted a sign in the window of your business saying “Business for Sale”?
- Would you be able to keep your employees?
- Would customers still buy from you and would they sign long term contracts?
- Would suppliers continue to give you payment terms?
The answers are probably “No”, “No”, and “No”. Employees would start looking for a new job due to uncertainty. Uncertain if they will like the new owner and uncertain if the new owner will like them or even see a need for their position. Customers buy from those that they establish a relationship. How do they know they will get the same quality or level of service from a new owner? This may give a long time customer an excuse to start shopping the services or products they purchased from you for years. Suppliers may not know why you are selling and will want paid on delivery versus offering terms. This may create short term cash flow issues if you were previously given terms. They don’t want to have to try to collect their money from a new owner that they do not know.
These are several reasons a business sale must be completed confidentially. Selling a business means no signs advertising the business for sale and a game plan of informing parties of the sale at the right time. A properly planned, marketed, and transitioned business to a new owner will ease all of these concerns and maximize the amount that you will receive from the business sale. Loss of employees, customers, and supply terms could result in a decrease in revenue and cash flow causing a loss in business value and possibly make the business more difficult to sell.
Blind Marketing and Confidentiality Agreements are the Answers
Still wondering how to sell a business without telling the world that it is for sale? Blind marketing is a term that describes the vague marketing of a business for sale. We are able to “sell secrets” without employees, customers, suppliers, and competitors knowing that your business is for sale. One a prospect expresses interest in a business that we are marketing through one of our methods, we have them complete and sign a confidentiality agreement (non-disclosure agreement). This document forces the issue to weed our tire kickers to show that the party has real interest in purchasing the business. The document also asks for information to help assure that they have enough money to buy the business. This agreement binds the prospective business buyer from disclosing any and all proprietary information on your business.
Think Like the Buyer
One more tip on how to sell a business effectively – think like the buyer.
When preparing to sell a business, you need to think what would be a buyer’s first impression of your business when they arrive. Is it clean, well maintained, and up-to-date? Are the financial records in good order? Have you prepared answers and supporting data for those critical questions that you know a buyer will ask? Preparation is the key to a successful sale. You may only get one chance to sell a business to a buyer. The wrong answer to a question may send them on their way.
Many business buyers are first time buyers so they may be both excited and scared. They will perform extensive due diligence on the business to make sure that everything that you have told them is accurate. They will want their accountant and attorney to review the information. A business broker has the experience to help you prepare for this due diligence period when selling your business. An important point to remember is that buyers cool off while waiting for information to be gathered. Reviewing a due diligence checklist prior to a buyer prospect giving you one is critical if you want to prepare to sell your business to maximize your price and terms. Slowing down the momentum of a deal typically is not wise.
Do I need a professional to handle the process?
You will only sell your business once...why risk not doing it right?
Whatever your reason may be, selling your business is best handled by professionals. Our team is extensively trained in handling business transactions.
Our process involves two phases:
Phase I: Business Analysis Report
consisting of:
Business owner consultation
Business profiling
Market analysis
Business valuation
Our analysis is the critical step needed for preparing your business for the market. We will report options to you. You decide the next course of action. These options may include improving the business to sell at a later date, liquidation, addition of staff, refinancing, partnering or merging with a similar business, or selling your business at the current market price.
We report — YOU DECIDE.
If you decide that selling your business at the market range is your selection of choice, you have the option to use our success fee based transaction services. This includes:
Phase II: Confidential Marketing & Transaction Assistance
consisting of:
Preparation of marketing plan
Development of business presentation report or prospectus
Confidential marketing
Identification and screening of prospective purchasers
Deal structuring assistance
Negotiation
Due diligence assistance
Closing