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Four Reasons Why Confidentiality is Essential to Selling Your Business

Don’t want to decrease your chances of selling your business before you even start? Then pay attention to confidentiality, because a few simple precautions could save you from a host of problems and devaluing factors.

Imagine this: a small business owner wants to find a buyer for his business. So he announces to all of his clients, competitors, and suppliers that the business is for sale. After all, these people are either in the same industry or have connections to his business and are in many respects the best possible buyers. Unfortunately, by not maintaining confidentiality this business owner is putting himself in a high-risk situation. Consider some of the side effects of failing to maintain confidentiality:

Employee Security

Selling your business involves a rollercoaster of unpredictable factors, and telling employees too early in the process means that they will experience a prolonged period of uncertainty. Inevitably, this uncertainty will prompt them to look for (what they would view to be as) more dependable employment. This is especially true for highly skilled employees whose talents are in demand and who add considerable value to your business. Confidentiality helps ensure that employees are spared a significant portion of uncertainty, allowing the transition to take place as smoothly as possible.

Note though, that there is a right time to tell your employees – they may even be interested in purchasing your business. The key is to use discernment in determining at which stage your employees should be informed of your plans to sell your business.

Client Security

As mentioned above, there are many factors involved in selling a business which leads to uncertainty for the people depending on it. Clients are no different from your employees in this respect. If a client knows of your plans to sell your business they may lose confidence in your business’ ability to continue offering the same level of dependable service to them.

If you maintain confidentiality until the deal is complete, you will be able to persuade your clients that this change will be beneficial to everyone. You can do this by presenting a clear and predictable plan of transition to them – something that’s easiest accomplished after you’ve closed a deal with a buyer.

Aggressive Competitors

In an ideal world, your competitors would realize that purchasing your business would be an excellent way to quickly grow their own business. Unfortunately, not all competitors think this way, and some may see the sale of your business as a golden opportunity to go after your clients. Others may even sink so low as to spread rumours about your company. By keeping the sale of your business confidential, you can prevent other companies making your life difficult.

Your Future Buyer

Now, put yourself in the shoes of the future buyer of your company. Would you want to buy a business where the employees and clients are feeling uncertain and are in danger of jumping ship? How about a business where competitors are circling like vultures, waiting to snatch up key employees and clients? Also, if news of the sale has gotten out, how confident would you be – as a future buyer – that any other proprietary information belonging to the company is protected? A future buyer is most likely to be interested in buying a stable business, and ensuring confidentiality during the process of the sale is one of the best ways to ensure that your business looks like an attractive purchase to interested buyers.

Someone needs to buy your business – and perhaps it could be one of the people above: either an employee or a client or a competitor. But before you approach them, take time to consider some of the risks involved in disclosing the sale of the business to these parties. Think about their likely reaction and determine if you can risk the worst case scenario happening. We go through this in more detail (link) and (link)

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