Confidentiality is one of the most important things for a business owner to consider when it’s time to sell. In fact, as our experience has shown us time and time again, sellers who maintain a very high level of confidentiality are much more likely to get a favourable amount for their company.
If you have been approached by a buyer and you decide to sell the business without professional assistance, you must have the buyer sign a Confidentiality/Non-Interference Agreement. If the buyer provides one (and often they do), have your lawyer or an intermediary review it with you. Many so-called buyers are simply competitors looking to acquire information through industrial espionage. A business intermediary or a good transaction lawyer can provide you with an agreement that will protect your long-term interests.
The following is an excerpt from Doug’s book “There’s Always a Way to Sell Your Business”
She Got Her Name in the Paper
Martha decided it was time to sell her small shop, The Flower Garden. She ran ads in the local newspaper looking for someone to buy the business. In a very short time her intentions became general knowledge in the community.
As a result, her two key employees promptly quit and went to work for another company, creating operating problems – and great stress – for Martha.
The rumour mill started to grind. Suppliers became nervous, losing confidence in Martha’s continued ability to pay bills on time. A major customer who spent about $800 per week went to a competitor, thereby reducing her profits and the overall value of her business.
Had she used a professional business intermediary, that newspaper ad would never have been run. Martha could have continued to run her business profitably while getting into position to sell her company.
It is critical for you to keep news of a pending sale away from the employees. Employees have a variety of reactions when they hear about a sale.
Some will be concerned about the security of their job and about their mortgage and car payments.
Others will leave the company and go to work for a competitor.
Still others will come back and demand a raise because they may, correctly or incorrectly, believe the company just cannot get by without them.
Some will get over this concern and realize that the business, if sold, will still require their services as employees.
But all of this anxiety and stress can be avoided simply by keeping notice of the sale confidential.