The importance of confidentiality – when selling your business

August 1, 2014

Confidentiality Agreement

When business owners first approach me about selling their business – often their greatest concern is Confidentiality. The worry is that employees, vendors, competitors and customers may learn that the business is for sale. I will deal with each concern separately.

Employees: Employees may become concerned about job stability. This can lead to key employees seeking work elsewhere. Employee moral can plummet causing job attendance and performance to suffer.

Vendors: Long standing vendor relationships could be damaged. Vendors may change credit terms or pricing or even terminate the business relationship.

Competitors: Competitors may use the knowledge that a business in on the market to poach customers and employees.

Customers: Customers get nervous when they learn a business is for sale. They become concerned that a new owner may not honor pricing, warranties, commitments or that customer service will decline. These concerns may cause your customers to look elsewhere.

The combined effects of all these factors can be devastating for a business. The knowledge that your business is for sale will often affect the viability of the enterprise. It can cause the value of your business to decline or may even put you out of business.

Business Brokers know how to handle the sale of a business in a confidential manner. We do not advertise the name or location of your business. Advertising is not directed to the general public but instead we target business buyers. Now days this is done through advertising on websites dedicated to business sales.

When an inquiry is received our first step is to verify the identity of the prospect. They must sign a Non Disclosure Agreement (NDA). This is a binding document which requires the prospect to keep all they learn confidential. In most cases we will also require a Personal Financial Statement (PFS) to verify that the prospect has the financial wherewithal to purchase your business. Only after these documents are received will we release limited information.

A detailed examination of business records is only permitted after a potential buyer has made an offer or submitted a Letter of Intent acceptable to the seller. This examination of records is referred to as the “due diligence period” and is worthy of a post in itself.

In summation hiring a Business Broker will help protect the confidentiality of the transaction. This is why you should only trust your Business to a qualified and trained Business Broker. In Florida the best Business Brokers belong to the Business Brokers of Florida (BBF). Ask if your business broker is a member.

Anthony John Rigney
Board Certified Intermediary
Owner and Broker of Quorum Business Advisors, LLC