Selling a business is no simple task and without the appropriate planning, can lead to disappointment and failure. Knowing the necessary steps to take and what to avoid in the sale of a business is often undermined by many business owners when they first look to sell their business. On a recent podcast segment hosted by Business Innovators Magazine, Bill West, founder of West Advisory, speaks on his years of experience assisting Florida business owners with the valuation and confidential sale of their businesses.
"One of the biggest difficulties that the business owner has is keeping the sale confidential"
Says Bill West, when asked why 80% of businesses that go for sale tend to go unsold. While there are a lot of ways the sale of business can go wrong, not keeping the sale confidential is what Bill claims is the #1 thing that prevents business owners from selling.
What is business confidentiality and why is it so important?
A confidential business sale is a transaction in which a business is sold to a buyer while maintaining strict confidentiality about the sale. In this type of sale, the seller and the buyer agree to keep the details of the transaction private and not disclose any information to third parties, including employees, customers, suppliers, and competitors.
The confidentiality of the sale is usually achieved by using a non-disclosure agreement (NDA) that is signed by both the buyer and the seller before any confidential information is shared. The NDA outlines the terms and conditions of the confidentiality agreement, including the consequences for breaching the agreement.
A confidential business sale is typically preferred by sellers who do not want to alert competitors, employees, customers, or suppliers about the sale. This type of sale can help protect the business's reputation, customer base, and employee morale, which can be negatively impacted if the sale is made public.
In addition to the NDA, other strategies used to maintain confidentiality during a business sale include using a blind profile to market the business, conducting due diligence in a secure environment, and limiting the number of people who have access to the information about the sale.
It is important to keep a business sale confidential for several reasons:
Protecting the Business's Reputation: If a business's customers, suppliers, or employees learn about a potential sale, it could damage the business's reputation. Customers may become concerned about the stability of the business, suppliers may change their credit terms, and employees may begin looking for new job opportunities.
Preventing Competitors from Gaining an Advantage: Competitors could use knowledge of a potential sale to gain an advantage over the business. For example, they could try to poach key employees, undercut prices, or launch a marketing campaign to steal customers.
Avoiding a Negative Impact on the Sale: If customers, employees, or suppliers become aware of a potential sale, it could create uncertainty and disrupt the business's operations. This could negatively impact the sale by reducing the value of the business or causing the buyer to back out of the deal.
Protecting Confidential Information: A business sale typically involves the exchange of sensitive information such as financial records, customer data, and trade secrets. Keeping the sale confidential can help prevent this information from falling into the wrong hands and being used for malicious purposes.
Overall, maintaining confidentiality during a business sale is critical to protect the business's reputation, operations, and confidential information, and to ensure a successful sale.
You can watch the entire podcast segment with Bill West Here:
If you are Florida business owner who is looking to sell your business with success, reach out to an experienced advisor today.