by Glen Cooper, CBA
Confidentiality is usually critical to the business selling process.
But, there are three questions you, as a seller, need to ask: Is confidentiality really important to the sale of my business? If it is important, what steps do I need to take? And, what should I say if somebody asks me if my business is for sale?
Confidentiality is important for a variety of reasons. Customers, competitors, employees and creditors all will have different reactions to finding out that your business is for sale. Buyer prospects themselves often react negatively to a business opportunity that has not been kept confidential.
Business brokers usually follow four steps to protect a seller’s confidentiality. If you are using a broker, make sure that these four steps are being taken. If you are selling the business without a broker, you may want to follow one or more of these steps yourself.
You also need to rehearse how you will respond if ambushed by surprise. You may get asked about your business sale when you least expect it.
Why Worry About It?
As a seller, you may not want your employees, customers, competitors and creditors to know that your business is for sale. Employees, fearing the unknown, may quit. Customers, fearing a decline in performance, may switch. Competitors may spread rumors. Creditors may get nervous. For your business, a breach of confidentiality may spell disaster because any one or more of these reactions can happen.
Some of these fears may be blown out of proportion. Employees usually don’t quit. Most customers will remain loyal. Competitors and creditors often pay no attention. For some businesses, it really doesn’t seem to matter, especially if the seller anticipates a short selling period.
But, even if confidentiality doesn’t seem important in the short run, at least one major problem may arise when the business remains on the market for an extended period. If your business is known to be for sale for too long, it may appear to be ‘shopworn merchandise’ to buyer prospects. This drives the price down. It may even make your business impossible to sell.
You, as a seller, are the best judge of whether or not confidentiality matters. In most cases, you are going to decide that it is critically important. It is almost always better to limit the spread of your company information.
If, in fact, you do decide that you want maximum confidentiality, here are the four steps most brokers take to ensure maximum confidentiality for their clients. If you are selling the business yourself, you may want to copy them for your own action plan.
Step 1: Prepare Blind Ads and Listings
‘Blind’ ads and listings are used by almost all business brokers. However, writing effective blind ads and listings is difficult. An ad or listing that’s too general won’t get a good response.
A ‘blind ad’ is an advertisement that camouflages the identity of the business in some way. A ‘blind listing’ is a camouflaged description of the business in a multiple listing database.
The goal of any business opportunity ad is to attract buyer prospects. When the identity of the business has to be guarded, though, an ad has to be cautiously worded. When this happens, the ad may lose its effectiveness. The less specific it is, the more it looks like every other ad.
“Manufacturer for Sale. Call Broker. 555-1212” will get a minimal response. Describing the business for sale as a “Manufacturer of low-tech product” will get a better response. “Manufacturer of low-tech product in high-tech market” will get the best response. Adding details to an ad usually improves response.
The more details you add, however, the more you risk breaching your own confidentiality. Remember that there may be competitors and employees reading your ad. They can be pretty creative in assembling information from different sources! This is especially true if they already suspect something.
More troublesome than small ads are the longer descriptive listings that one can now place on the Internet. There are several multiple listing services which accept listing placements by brokers and sellers. To be competitive in this environment, you may feel the need to write as many as 500 words about the business for sale! Writing that much copy without identifying the business is much harder than ad writing. But, the same rules that apply to ads apply to these longer listings.
A business broker has a big advantage here. The business broker usually has many businesses for sale which attract buyer prospects. Buyer prospects respond strongly to ads which indicate that the broker has a wide variety of business opportunities, even if the individual business descriptions are vaguely worded. The broker can then mix and match buyer prospects and listings.
The broker may also have more than one like-kind business for sale, further helping to mask the specific identity of any particular business. If a broker advertises five manufacturers, for example, buyers will call on the ad anyway even though no more information is provided. The fact that the broker has five such opportunities is sufficiently compelling to get the desired response.
While confidentiality is a critical part in listing your business for sale, there are many actions to consider that will impact the success of your listing. For a full (and FREE) guide on selling your business online, visit our Guide to Selling Your Small Business.