Sell
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Step
3 - Finding & Qualifying Buyers
Why
Confidentiality Is Important When
You Sell A Small Business
You
should keep the sale of your business as confidential as possible
for as long as possible.
When
it becomes commonly known that a business is for sale, suppliers
become hesitant to extend terms and customers become afraid
to enter into new agreements. Employees quite understandably
begin to worry about job security and inevitably their energies
are focused more on finding a new job then on their current
one.
One
of the keys to selling your business successfully is to continue
to operate the business as effectively as if you were going
to own it forever. And you can't do that with all this uncertainty
among your customers, suppliers and employees.
And
then there are all the ways your competition can
use your impending sale against you. It can become very easy
for them to start taking your customers away from you.
Before
you know it, your business isn't worth as much as it used to
be.
In
the sections that follow we will talk in more detail about specific
things you can do to protect your confidentiality while adverting,
negotiating and closing the sale of your business. But for now,
resolve to only share you intentions with people who can actually
help you sell your business. This would include your lawyer
and accountant, but not too many other people.
How
A Lack Of Confidentiality Can Affect The Business Buyer
In
addition to the problems you encounter with employees, customers
and suppliers, a lack of confidentiality can dramatically damage
the buyer's perception of your business.
Buyers
tend to think buying a business is like buying a house or car.
The owner runs some ads, interested buyers respond, they then
negotiate for a little while and in a few days or weeks the
deal is closed.
Nothing
could be further from the truth: Many very good businesses take
a year or more to sell.
The
problem is with the buyer's perception: if he knows you've been
trying to sell your business for 6 months to a year, he may
think there is something wrong with your company. Once the buyer
has this perception in his head (it may be spoken or unspoken)
it becomes almost impossible to sell for the best price.
The
last thing you want to happen is for one of your suppliers,
customers or competitors to tell your prospect that you have
been trying to sell the business for 6-12 months but have not
been able to find a buyer. Because the typical buyer doesn't
understand that even the healthiest business can take a year
to sell, he starts getting nervous. He asks himself, "why
doesn't anybody want to buy this business?" "What
am I not seeing?" Next thing you know, he's searching for
some other opportunity to buy.
While
negotiating, you want to have as much control as possible.
If you're in a hurry to sell because your employees are getting
nervous or a competitor is spreading rumors it will always cost
you money.
Here
Are Some Steps You Should Consider To Protect Your Confidentiality
1.) Don't tell people who can't do anything to
help you. Only tell the people who can help you sell the company
such as your accountant, lawyer and other advisors.
2.)
Don't put your company name in any of your advertisements and
be as vague as is reasonably possible when it comes to describing
your location.
3.)
Have every buyer sign a confidentiality agreement before giving
them any detailed information.
4.)
Request that along with the confidentiality agreement, the buyer
complete a "Buyer Information Sheet" with some basic
information about their business experience and finances. It
allows you to learn a little about who your are dealing with,
and just as importantly, it helps to weed out weak prospects
because they will either refuse to provide the information or
they will honestly tell you that they have no cash and bad credit.
Click
Here for the "Buyer Information From" we use
here at TheBizSeller.com. This is information you want
to gather in addition to the signed confidentiality agreement
What
To Do If People Already Know You Are Selling
Often,
when the business is very small or the owner is ill and has
talked openly about retirement, the sale is common knowledge.
If this is the case, you should still be concerned about
confidentiality.
Your
tax returns, financial statements and client lists are still
confidential and incredibility important to protect. Proprietary
information like manufacturing processes or recipes add tremendous
value to the business the buyer is paying for. You must protect
this information at all costs even if the sale is common
knowledge.
Also,
just because the sale isn't a secret doesn't mean prospects
can just show up at your business whenever they please, or have
direct contact with your employees when you are not around.
The
issue of confidentiality will come again and again in throughout
the selling process even if you have openly announced the business
is for sale.
Regardless
of your situation, you must demand that prospects sign a confidentiality
agreement before seeing any in sensitive financial statements
or proprietary information. And you must demand buyers only
talk you (and not your employees) throughout the process.
Sell
Your Business Tips, Hints & Techniques:
Enter
your name & e-mail address below and each week I'll send
you detailed tips, facts, resources & ideas you can use
right away to help sell your business faster and for more money.
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