A buyer is interested in learning more about your business – great! But how do you show them your business without giving away too much information?
To successfully balance making a sale with confidentiality interests, you need to decide when to share and what to share.
When to Share
Sharing details about your business is not the first thing you should do when trying to make a sale. First, make sure you’ve completed some essential pieces of paperwork, such as a signed non-disclosure agreement and you can ask the buyer for a financial snapshot such as the availability of liquid funds and their credit score, to determine if they are in a position to even consider buying your company.
After the paperwork is in place and the finances look solid, you can release a document called a confidential information package which does not disclose key sensitive information about your business. Also, and also potentially after an initial conversation where you get to know the buyer, then you can consider sharing some details of your business in order to make a sale.
Real-Life Concerns (FAQs)
Q. My employees don’t know I am selling the business. When should I show my storefront to a potential buyer?
A. If employees are not being informed of the sale, it is a good idea to show the business after hours. Also, make sure that when you show your storefront to potential buyers that it is in top condition for viewing. A clean, well-organized, and freshly painted space is more likely to make a good first impression.
What to Share
When you explain to a potential buyer all of the reasons that your business would be an excellent purchase, be sure to highlight the strengths of your business. Good examples of possible topics include: promising areas of growth, a unique story about how your business came to be, and a thriving workplace culture.
Topics to avoid discussing with your potential buyer include things like trade secrets, proprietary processes, contact lists, or any information that should be kept from anyone but the ultimate buyer of the business. By exercising discretion in what you share, you are protecting your ultimate buyer (and your ultimate sale) from worries that other parties may have knowledge of your intellectual property.
Real-Life Concerns (FAQs)
Q. What if they are asking for sensitive information?
A. Explain that you cannot share that information at this time in order to protect the interests of the ultimate buyer of the business. However, let them know that they will be able to access the sensitive information during the due diligence period when they will have time to conduct a more thorough inspection of the business.
Q. What if they keep asking for more meetings?
A. The answer to this question is highly context-specific. A good rule of thumb is to allow no more than 4 meetings, but this is dependent on the reasons why a potential buyer wants to meet again. Are they fearful? Are they uncommitted? Has there been a miscommunication? Try to answer their concerns with the information you are comfortable sharing at an early stage in negotiations and assure them that a lot of information is shared after an offer is submitted – during the due diligence period (see question above).
Knowing when to share and what to share is undoubtedly a key part in proceeding with the sale of your business. If you use these two tools to help prepare for your first meeting, you will be more likely to leave your buyer with a good impression while avoiding unnecessary risk in the process.
Two other quick tips to remember for the crucial meet-and-greet with a potential buyer:
First, during the meeting, be sure to ask them some questions too. As much as this is you trying to make a sale, it is important to try to get to know the person you could be selling to.
Second, as the meeting wraps up, schedule a follow-up meeting to discuss any questions or concerns the buyer might have. Even if a buyer appears to lose interest, try to discover the reason why they do not want to proceed and if these issues can be addressed. Just ask! Even if this buyer ends up not being the ultimate buyer, information on why they declined to purchase the business could help in the future as you make your pitch to other potential buyers.