As promised, this is the second article on preparing your business for sale. In the first article, we discussed the need for good financial reports and a breakdown of the salary, perks and benefits. Buyers buy because they like the financial condition of the business.
Now let’s look at the need for confidentiality while you are involved in the adventure of selling your business.
- Now comes the sensitive matter of who you tell that your business is on the market. Our best advice is just your trusted advisers, such as your attorney and accountant. You feel a loyalty to the employees and may want to share with them that you are selling. Experience has proven, time and again, that it is not a good idea to tell the employees until after the Closing and you have the check in your hand. Who hasn’t heard the stories of large businesses being sold and massive layoffs following the transition? Rarely is this the case in middle market business sales. Buyers realize the value of the employees and the need to retain them. They are a valuable asset. The business cannot function without them. It is kinder to wait and explain that you were ready to sell and then introduce the new owner and be reassured that their jobs are safe.
- You don’t want your customers knowing that the business is for sale. It creates an uncertainty in their minds. Have you ever seen a restaurant with a For Sale sign in the window? I don’t know about you, but I worry about the quality of the food if they are selling. I drive past those restaurants.
- Vendors can be funny, not in a humorous way, when they find out the business is for sale. They may worry about who will be sitting at the helm after you leave. They may decide now is the time to collect on any lines of credit that you owe. Furthermore, some may have the gossip gene and want to share the news that you have the business on the market with [drum roll] your competitors. The competitors would have a heyday, as we used to say on the farm, with that information.
In following articles will cover other aspects of the selling process.
One of the best ways to ensure confidentiality is to enlist a mergers and acquisitions advisor or business broker. These advisors handle all transactions in a highly confidential manner.
Read Part 1
Jan Fowler and Greg Colvin cowrote this article. Both are associated with Acquisitions Unlimited, Inc, a merger and acquisitions, business intermediary company in Tampa Florida. Acquisitions has consulted with and provided valuation, marketing and sales assistance to more than 500 families and business owners.