In this series of articles, we are going over the top mistakes business owners make when they decide to sell their business.
(Missed any of the other parts? No worries, you can catch up right here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, and Part 10)
Many factors go into making a business sale that leverages the rewards you hope for. It is important to pay attention to those factors that may hinder your ability to successfully sell your business and actively take steps to keep them at bay. One wrong move can stop a sale in its tracks and may even jeopardize your business. Keep your eyes open and stay away from deadly mistakes that can place your future at risk!
Most of the mistakes business owners make at the time of selling their business can be avoided through a better understanding of the sale process and implications of their actions regarding the event.
Deadly Mistake: No Confidentiality!
The eleventh mistake they make is not preserving the confidentiality of the sales intent. Confidentiality is the key to business stability. It helps keep the business afloat and ensures proper continuity. You try to keep the sensitive business information under wraps while establishing and expanding your business, so why should it be any different when trying to sell the business?
Speculations about the future of your business can significantly affect its current performance as well as the chances for it to be valued optimally. If you openly market your intent to sell your business with the hopes of generating the most interest and attract prospective buyers, you may unknowingly be harming your chances for success. After all, the buyer will want to take over a thriving business, not one wrought with turmoil and anxiety due to a false conception surrounding the sales event.
Why Confidentiality Is So Important
Confidentiality is important in order to keep the business operations intact. If the word gets out that you are planning to sell your business in the near future, it could adversely affect sales as well as your relationship with your staff. Your employees, understandably, may feel nervous about their job security and may be apprehensive about the change of guards in the company. Key employees may abruptly leave the business in search for what they perceive as better and more stable options, even before you get a chance to reassure them. The efficiency and effectiveness of your business’ operations is sure to take a hit if information is not handled with care.
A business without knowledgeable and experienced employees is unlikely to fare well with the prospective buyers, as key employees ensure business continuity. An uncertain customer base may also add to the risks. Customers may feel such uncertainty concerning the future of your business may threaten their supply chain, or fear that they may not receive the same quality of products and services under the new administration. Your competitors may try to take advantage of the situation to steal business from you. The vendors and suppliers may want to tighten the credit terms to cover their bases.
How Lack Of Confidentiality Can Kill A Sale
A business shrouded in uncertainty is hardly going to find a quality buyer. To ensure high valuation of your business and to minimize risks, it is important to market your sale intent very discreetly. A team of experienced business advisors, brokers, and legal experts can help you achieve the level of secrecy and confidentiality conducive to the proper sale prospects. Various strategies can be adopted to ensure confidentiality. You can begin gauging the interest or demand in the market for your business by revealing just the right type and amount of information to pre-qualified buyers.
This level of confidentiality is much trickier to accomplish if the owner decides to sell the business on their own, given that their staff will be much more likely to perceive the motions of the owner around preparing and marketing the business. Selling a business demands thorough preparation and extensive planning. You cannot expect to keep it secret while at the same time asking your accountants and legal experts to prepare for your exit strategy.
No matter how tactful and secretive you are being, trying to handle all aspects of your sale preparation on your own is bound to raise some red flags. A team of expert professionals is equipped to handle that job with more tact and caution.
That being said, to increase the chances of finding the right prospective buyers for your business, you may have to chip in some time as well. It is important that only the people who absolutely need to know about your plans know about it. Contact the people you trust the most, those who are not likely to “spill the beans” on your exit plans. Strategically target your marketing efforts towards a few prospects likely to show serious interest in your business. It is not wise to offer all the information about the processes and structures of your business to all of the prospective buyers just to woo them. Start with some carefully-prepared marketing materials, and reveal more commercially sensitive information only when the deal is certain.
Tools To Help Nurture Confidentiality
One of the best ways to ensure confidentiality when selling a business is to make all of the prospective buyers sign a Non-Disclosure Agreement (NDA). This can deter the buyers from revealing your trade secrets, sensitive financial information, as well as customer or supplier’s list to your competitors. The agreement must mention the penalties and remedies in case any of the prospective buyers use the information provided to them for any purpose other than evaluation of the business. You can also demand that all concerned parties keep the sale intention of the owner secret. If the deal falls through, your intent as well as business information will remain confidential.
Irrespective of the size and or type of your business, maintaining confidentiality when planning to sell your business is absolutely critical. A good team of advisors will know how to simultaneously market your business while maintaining strict confidentiality. They can help you maintain your business operating as usual, and keep your sale intent hushed for as long as possible. Keeping the sale process confidential until the very end will help you keep uncertainty at bay, minimize the associated risks, maximize the selling price, and complete the entire sale process without much hassle.