Unlike a product or an asset, a business does not simply comprise one item whose ownership can be transferred to anyone instantly. When we talk about a business we are not only talking about the headquarters or the company building, instead, we are referring to the entire brand, its employees, purpose, history, and clientele among many other things.
The sale of a business involves many nuances and brings along critical requirements that must be followed to ensure a successful transfer. Confidentiality has always been a major issue during business dealings. Many owners are unable to recognize the importance of ensuring secrecy and privacy during business matters.
Information Leaks Can Hurt Your Business
Failure to practice confidentiality not only results in an improper transfer but also hurts the business. When news of business sales spreads through the people, there is a risk of negative repercussions including client dissatisfaction, brand image issues, employees uproar, and even unexpected resignations.
All of these things negatively affect the company’s valuation and many owners end up facing severe losses when selling the business. Although truthfulness never hurts, sometimes prolonging the decision to reveal the big news is best for all parties. In his book “The Road Beyond – What Nobody Tells You About Selling A Midsized Business”, Achim Neumann has discussed how businesses are severely affected when the news of sale becomes public.
Avoiding Uncertainty and Complications
One of the greatest risks is that it can hurt the brand’s position in the market. Competitors love any news they can use to undermine the business’s position. A business sale is a sensitive matter that requires a lot of discretion and communication to ensure the owner receives complete compensation for their business.
Due to this, no offer or news is final until all the paperwork goes through. Sometimes the process even takes months. If news of the transfer has already leaked during this time, the brand’s image will only decline due to all the uncertainty and complications surrounding the matter.
How to Practice Confidentiality During a Sale
With all said, it can be tough to maintain confidentiality during a business sale. The matter involves a lot of parties and it can be difficult to manage everyone’s reactions. Difficult? Yes, but not impossible.
Confidentiality has been a serious issue for a long time and thankfully today we have a proper and professional way of avoiding the problem. Over the years, the process of selling a business has evolved to tackle more relatable problems like confidentiality and professionals are now able to take better measures to leverage the perfect deal.
Below, we have listed a few important steps that you can take to maintain confidentiality during a business sale.
Prevent the News From Spreading
One of the biggest challenges that owners face when going through a sale procedure is the anxiety that comes with it. The anxiety may not be limited to the employees but can also spread to customers when the news is revealed.
Thus, we advise anyone thinking about selling their business to maintain privacy during the meetings. Keeping the news to a small circle can be a big challenge especially since most companies operate like a “family” where secrets are shared, problems are solved and everyone enjoys a healthy community where the business can thrive.
However, you must take the opposite approach during the time of sale. Make sure you reveal the news to as few people as possible. Furthermore, you must only choose people that you can trust with the news and ensure that everyone in the party respects the confidentiality of the process.
Get Professional Help
A business sale is not a simple process that you can go through alone. It involves a lot of complicated paperwork and back-and-forth meetings to successfully transfer. You might fall into legal trouble or get scammed if you decide to take everything into your hands. It’s better to leave the complicated aspects to the professionals who are specially trained to handle these tasks. A professional team may consist of a Certified Public Accountant, a Merger and Acquisition advisor like those at the East Coast’s top firm, A. Neumann & Associates, a business attorney, and a broker. Each of the aforementioned professionals are proficient in a specific task and they work together to get you the desired deal. Make sure you choose a trusted team that has tons of experience.
Importance of Legal Documentation
Unlike selling a product, you cannot simply market the sale of your business on eBay or in the newspaper. Publicly announcing the sale can cause serious backlash and anxiety from the staff, employees, and customers. Furthermore, you will be disregarding the confidentiality of the process. You must rely on a professional broker or advisor to prepare the relevant documents for you. They will run a confidential marketing campaign to find serious buyers without disclosing any major details about the company. In most cases, a Blind Profile of the company is created which is then sent to the potential buyer/s after receiving the owner’s permission. All parties must ensure confidentiality during this process to avoid any legal trouble.
Choosing the Buyer
You may not always receive the best response to your business sale. Sometimes, the marketing campaign attracts non-serious buyers or the media who can negatively impact the sale or waste your time. To combat this, each buyer must go through a buyer qualification procedure. Among other things, the buyer has to sign a non-disclosure agreement, reveal their financial statements and assets, and provide a managerial profile. You will usually work alongside a professional like an M&A advisor to draw up all the documents and review the buyers.