Why confidentiality is crucial when selling a business
Selling a business is a delicate process. Depending on a number of factors, the process may take a short or longer time to be fully completed. The process begins when the owner makes up their mind to sell the business and is completed when the new owner assumes ownership and, therefore, operations of the business.
Regardless of the reason for wanting to dispose of your business, the need for confidentiality from the start to the end of the process cannot be over emphasised. This is because any breach in the process can lead to an unsuccessful sale process or result in you selling at an undesirable price. You can easily lose out on a lucrative deal simply because your information fell into the wrong hands, and too soon at that.
Why is confidentiality so important when selling a business?
Some of the reasons why you need to maintain confidentiality when selling your business are:
To allow for a smooth process
Letting too many people know about your intention can easily curtail the process of selling your business and either slow it down or stop it completely. Releasing the information prematurely arms people with an arsenal that they can use against you. With more information than they should have, these less than honest eagles may try to swoop in for the kill to make an easy buy without letting you go through due process. This may cause you unnecessary pressure and make the process strenuous, yet it should be smooth sailing for the most part. There are proper times and ways to release financials, customers, and other proprietary information, and they are all important to the need for the process to be smooth and controlled.
To keep trading partners from switching up terms
During the sale of a business, you are definitely looking to make the most out of the deal. This means your business should also be in optimal performance mode the whole time to ensure your cash flow remains as unaffected for the most part. Should your other partners (creditors and vendors) catch a whiff of your impending sale, they may tighten the terms and give you shorter notice/ window periods for fear of losing their money in the course of the transfer of ownership. To ensure your business runs smoothly through to the last minute, keep the process as secretive as possible to protect it from prying eyes.
To prevent employees from getting nervous
If your business has a number of employees serving it, letting slip that the ownership may be changing hands may throw your employees into a panic. This is because of the uncertainty of the whole situation; will the new owner restructure the business? Will they retain your current employees or hire new ones once takeover is completed? Will your employees’ remuneration be affected in any way? This kind of uncertainty among your employees is the last thing you need to deal with in the process of selling your business. It results in reduced productivity and you don’t want your numbers looking down in the middle of disposing of your business, do you? To prevent this from happening, make sure you maintain an airtight ring around the circumstances surrounding the sale of your business. Employees learn of the sale of a business the day AFTER closing almost 98% of the time.
To manage competitors
In any business environment, competitors serve to keep you on your toes. Customers are a scarce commodity and the competitors’ main aim will be to reduce your customer base and deflect business to themselves. If your competitors come by news of your selling your business they could use it against you to dissuade your customers from continuing to work with you. This may be through spreading falsehoods and discrediting your business to make it look unstable and therefore helping their business while hurting yours.
These are just but a few of the reasons why you should ensure the process of selling your business is kept confidential until the time is ripe for you to let the cat out of the bag, which 98% of the time is AFTER closing and the sale is complete The first meeting with he buyer as the new owner is paramount, and a good broker can assist with that too.
