Confidentiality is crucial when selling business



Most people can relate to selling a home or other real estate.

A lot of exposure is involved, and everyone needs a place to live. People see signs on houses, ads in the newspaper and publications dedicated to selling homes. There are even reality TV shows about flipping houses. The general rule is that you want everyone to know your house is for sale.

As you prepare to put your house on the market, you get the word out to as many people as possible.

The "For Sale" sign is placed in the front yard; you invite people into your home during an open house; and you put ads in the newspaper and online. Getting the word out increases the likelihood that the property will sell, and confidentiality is usually not an issue.

However, that's not the case when selling a business. Place an ad that your business is on the market and people start to wonder. It creates an air of uncertainty that can be detrimental to your bottom line and put the company in jeopardy.

Unfortunately, many people assume that if you are trying to sell your business there must be something wrong with it. This is not always the case. People sell businesses for many reasons -- death, divorce and partnership issues, to name a few. The No. 1 reason for selling a business, people tell me, is that they are tired of it and want a different challenge.

To increase the likelihood of a successful sale of a business at an optimum price, it is critical that it be kept confidential.

What's likely to happen if people find out the business is up for sale?

Employees get nervous. They begin to worry if their jobs will disappear or if they'll get along with a new owner.

Some may even quit before you have a chance to reassure them, and it will probably be the good employees who leave. They'll start looking for jobs that make them feel more secure.

Losing key people is serious, particularly during the sale process. Key staff members provide valuable continuity and business knowledge that buyers are looking for. Lose them and potential buyers also may be lost.

Customers begin to wonder. They may become concerned that the business has problems that could threaten their supply chain. They may start to wonder if they'll get the same quality from the new owner.

Sales may drop as some customers stop using the product or service that the business provides for fear they will start to see a decrease in the quality of the good or service provided.

Once competitors find out, rest assured they'll let your customers know and use it as ammunition to bring that business to their company.

It opens the door for them to steal business from you.

Vendors and creditors may tighten terms. You may be working with terms of net 45 or more to benefit your own cash flow. But once creditors learn that the business is for sale, you may find those terms tightening or notes unexpectedly called due.

On average, a business sale takes nine months to one year. If even some of these changes occur early on, the impact can be dramatic. You'll find that you're not only running a business, but you're also busy putting out fires.

A buyer wants a successful operation with few changes until he can make those changes. Too many question marks translate to greater risk and lower purchase offers.

Confidentiality is crucial no matter the size of the company or the type of business. To maintain confidentiality, use a professional who understands the process -- use an intermediary. An intermediary will market the business in a confidential manner while providing just enough information to attract the buyers you are looking for.

The intermediary should be diligent in screening inquiries to be sure competitors aren't out there fishing for details. The intermediary should be sharing your identity only after determining that a potential buyer is seriously interested and is qualified. Serious and qualified buyers should also be required to sign a binding confidentiality agreement that holds them accountable for leaking information.

You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the time is right will help you to minimize uncertainty and maximize the sale.

David Yezbak is the president of Sunbelt Business Brokers in Augusta and Columbia.