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Why does Confidentiality Matter when Buying or Selling a Business ?
Contributed by Sunbelt Business Brokers
Many business sellers, and potential buyers, want that big sign that says
"I
am For Sale" to be the first thing that someone sees.
Sellers believe that this is the way to attract their buyer.
However, Buyers want to know "what" they are buying before they'll either
provide information, or spend any time investigating.
The reality is, that kind of public disclosure can harm the business, and in
some cases, even destroy it. True, there are businesses where public
knowledge that it is "For Sale" may not matter. But, here are some
real examples of where this is not the case:
- Your landlord may prefer to have someone else in your spot, or has another
tenant who wants to move, or knows they can't easily increase their income in that
spot with your kind of business. Advance notice of the business for sale
can allow them to pursue other alternatives.
- Your employees may become fearful and leave. Worse they can take
customers with them, or they can instill fear in your customers who then find
another place to purchase your goods and services.
- You start to have people stop you in your work to ask about buying the
business. Your time, needed to keep the business running and profitable,
is now filled with sharing confidential information, or just "chatting" with
tirekickers and curiosity seekers.
- Your suppliers are worried you might actually be in trouble and are closing,
or that the buyer might not be as good as you are, so they look for new customers
to carry your lines.
- Your competitors smell blood and opportunity and start to poach customers
or pick up lines that had been closed to them.
- You get an "offer" that is too good to be true. Of course it wasn't
really an offer and doesn't actually get to a sale, but you now have a belief
that that is what the value is, and you turn away real offers.
Buyers should care about confidentiality for exactly the same reasons as
Sellers. If the business is harmed during the sales process by a lack of
confidentiality, it hurts what they might buy. Even if they don't buy
this business, protecting the confidentiality is a good thing, because "passing
it forward" protects another business they might be investigating.
If a buyer is not prepared to demonstrate that they understand and will protect
confidentiality - and - that they can afford your business, they really don't
have the right to any information about it, including knowing what business it is.
Download a .pdf copy of this article.
WANT TO LEARN MORE: The London, Ontario office of Sunbelt
Business Brokers offers a free program called "Buyer 101". In that 2 hour seminar, we discuss only 4
key issues that are critical to a potential business Buyer - Importance
of Confidentiality; How to Determine Value; Financing a Purchase, and;
the Offer and Due Diligence process. These same elements are
critical to - and are the same for - business Sellers! Please
Email us or call: 519-473-2227 to register for the next course!
Erik Twohig, CMSBB President, Sunbelt Business Brokers of London
Sales Representative, Sunbelt Business Brokers Premium
134-4474 Blakie Road, London, ON, N6L 1G7
T: 519-473-2227 x 22 C: 519-670-9214
E: erik.twohig@sunbeltnetwork.com
Web: www.sunbeltlondon.com
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