How to Sell Your Business without Losing Your Mind---and a Ton of Money
Curiosity killed the cat, as the old saying goes. But business owners, who want to sell their businesses, must avoid the curiosity seekers, or risk becoming the cat that gets killed.
Business owners often ask me the secret to successfully selling a business. The answer is this: knowing how to sell something that the sellers do not want anyone to know is for sale. Confidentiality is the golden key for opening the door to a successful business sale.
Why is confidentiality so important? Let's examine a few scenarios that could play out if the marketing of a company was not kept quiet:
• Customers may switch to your competitors because they don't like change. Or maybe they've only remained customers because of personal friendships maintained with the current business ownership. Sometimes customers are worried that the "chemistry" won't be right with a new owner, so they begin looking for a new supplier.
• Competitors can use the knowledge to a seller's disadvantage. They can contact your customers/clients and woo them with special deals and discounts. Worse, some competitors may spread information about your company that may not be true, all to put your company in a bad light with the community and your customer base.
• Employees don't like to worry about the unknown. They worry about their jobs, pay scale, status within the company and most of all...they worry about change. Some employees want to be in control of their own destinies and will actually begin looking for work elsewhere; sometimes with your competitors.
• Vendors may get wind of the potential sale of your company and begin to worry about your credit, and the credit of a new owner. Some vendors, upon learning that a customer's business is for sale, have been known to put their customers on COD with no advance warning.
There are many other issues that I could add, but I'm sure you get the picture.
How does a business owner sell a business without opening Pandora's Box? The best way is to engage an experienced professional business intermediary.
I am often asked exactly how we can market a company, and still keep the sale confidential? While I'm not going to share our proprietary professional techniques, I can provide you with the following overview of the process:
• Advertising and making direct contacts with known investors and buyers are all done with "blind" teasers about the selling company. We accentuate the positive virtues of the company without identifying the name or exact location of the business.
• Non Disclosure/Confidentiality Agreements must be signed and dated by potential acquirers. We require them to execute our own stringent agreements; if the candidate balks at signing our agreement, then the buyer just wasn't that interested. Plenty of qualified buyers will--and do sign rather stringent confidentiality agreements.
• Financial Ability of the Buyer is requested. Individual buyers are required to submit a personal financial statement (which we initially hold in confidence). The Buyer must realize that we are only willing to share identification and confidential information about the Seller with financially capable candidates. Non individual Buyers are asked to provide company financial information or banking references that will provide some indication of financial ability to acquire a target company. If an individual or corporate Buyer does not wish to share their information, they will not learn the identity of the Seller. Qualified and experienced Buyers know "the drill" and if they are serious buyers, they will provide the requested information.
• Controlling contact with the Seller. Once a Buyer has been pre-screened and determined to be worthy acquirers, the Buyer is not given direct access to the seller. The business seller should be busy operating the company just as they would if the business were not for sale. Disrupting normal business operations would be costly, and the seller can't be bothered at a Buyer's whim. The intermediary “fields’ all pre-offer questions, obtains the sel