One of the greatest concerns business owners express to Charles Tenney & Associates (CTA) is a potential breech of confidentiality during a business sale. Although this is a very legitimate concern, much of the anxiety from this issue comes from owners not having a clear understanding of the measures business brokers take to protect confidentiality in the context of a business sale.
For many business owners, the two most sensitive stages of a business sale, as it relates to confidentiality, are
1. the initial discussions with a business broker and
2. the marketing effort of a business
Protecting Confidentiality during Initial Discussions with a Business Broker.
It is very understandable that business owners are reluctant to share sensitive financial information and disclose their exit plans with a business broker they do not know very well. Even more understandable when that business broker wears a big cowboy hat.
In the early stages of discussing the potential sale of your business, many business brokers will offer a confidentiality agreement to help owners feel more at ease about disclosing information. If the broker does not offer a confidentiality agreement, feel free to ask for one if it makes you feel more comfortable. A broker is always happy to provide a confidentiality agreement to help facilitate a more open and productive discussion about your considerations for selling.
Protecting Confidentiality during the Marketing Effort of Selling a Business
Maintaining confidentiality during the marketing effort is a critical component to facilitating a business sale. A breech of confidentiality can not only disrupt a business sale but also the entire stability of the company moving forward. That is why business brokers, especially Charles Tenney & Associates, maintain very strict standards of confidentiality while marketing a business for sale.
All brokers take different measures to protect confidentiality. The following measures are a few Charles Tenney & Associates take to help protect our clients in the process of marketing their business for sale.
Introducing the business for sale through a general description. When publicizing the business for sale, the broker will conceal any information that could make the business plainly identifiable to the public. This could include withholding geographic location, vehicle types, etc.
Establishing private lines of communication. All contact between owners and business brokers about the status of the marketing effort is communicated through private email addresses and cell phones. Additionally, business brokers can make themselves available in off-peak hours/evenings to accommodate the need for business owners to isolate the marketing/sale effort from their employees.
Screening out tire kickers and wishful thinkers. Brokers focus a significant amount of time pre-screening buyers before disclosing any specific information about the business for sale. All buyers are required to sign a confidentiality agreement as well as provide proof of funds. Proof of funds is a buyer’s demonstration of financial wherewithal to purchase the business. It is also a powerful tool to qualify a buyer’s true interest in purchasing the business. If buyers follow the process CTA requires of them, CTA knows the seller has a qualified buyer. If they will not, CTA is able to protect confidentiality and avoid wasting time on someone just out kicking tires.
Protecting Customer Information. When buyers are evaluating the strength of a business for sale, many focus attention on repeat business. Naturally, disclosing information about customers is always a sensitive matter. But business brokers can help provide buyers the information they need to make an educated decision while still protecting confidentiality for the seller. Charles Tenney & Associates facilitates this information exchange through compiling a list of the business for sale’s top twenty accounts. No names. Just a number, the dollar amount and percent of revenue associated with each account. This information is usually enough to solidify a buyer’s interest in moving further in the process or moving on.
These are just a few measures brokers take to help protect confidentiality in a business sale. If you have questions about protecting confidentiality or anything else related to a pending business sale, please submit the contact form below and CTA associate will contact you.
