Sell Or Buy A Business at SellAEBiz.com

Why Confidentiality Matters when Selling or Buying a Business

Why Confidentiality Matters
Confidentiality should be as important to the buyer as it is the seller. The reasons are mostly the same for each. Confidentiality is important so that the business stays operating the same as when it is listed. Without confidentiality, there is a chance of losing customers, contracts, and employees.

Some customers have been going to the same businesses for years. This may be because they enjoy the owner and the employees. Sometimes a new store can open up that is closer but the customer still goes to your business. This is the best customer to have because of the loyalty. If this customer finds out that the business is for sale, they just might start going to the more convenient store. They do this because they think the new owner is going to change the atmosphere or not be as friendly as the current owner. Also, if you have long time customers that haven't shopped around for more cost friendly products or services, they may consider doing this when they find outthe business is for sale because they don't feel a need to be loyal to the new owner. If everything is confidential, then the customer will not find out and the new owner can start to build relationships with the previous owner so that things remain similar. This helps keep current customers which helps the new owner.

Occasionally, contracts can be lost if everyone knows that the business is for sale. Some companies or suppliers that give the current owner credit may want the money upfront in fear of not getting paid in a timely manner with the new owner. This can create a cashflow problem with the new owner or current owner if they fear they won't get paid.

Employees are another potential issue of the sale of the business is not kept confidential. This is very important if there are some key employees that the business would not be as successful without them. If you lose one of them, then your business suffers. I do find that the employees are just as worried about losing their jobs when the business is sold. They may be worried that the new owner has family members that can work there and replace them or the new owner may want to cut costs and let some employees go. When the employees get worried, then they may look for another job even if the new owner intends to keep them. As for the key employees, I would attempt to get employment contracts in place either as the seller or the buyer. If the seller has them in place, then the buyer feels more confident and knows the key employees will stay. If the seller doesn't have them in place, the key employees may think twice about signing employment contracts because they have no idea if you are good person to work for or not.

Another reason confidentiality is important to the seller is if the business doesn't sell. If for some reason the business doesn't sell, you do not want everyone to know it was for sale because it could effect your bottom line and then you are stuck with a lower performing business that may even be harder to sell next time.

Buyers, please keep this in mind when you call brokers and just want to know the name and location of the business. There is really no reason for you to know this information for the above reasons unless you are a qualified buyer and seriously want to buy a business.