Maintaining Confidentiality When Selling Your Business

For most businesses, maintaining confidentiality is important during the business sale process. Announcing your business for sale isn’t an occasion for guerrilla marketing. Unless you are reaching out to a prospective person or business you believe is likely to buy your business, all marketing of your business needs to be presented in a manner that conceals your personal and business identity.

You don’t want to risk tipping off customers, creditors, competitors, or employees, whose concern could weaken your business at the very time you want to keep it in its best condition. As you start marketing your business for sale, keeping the details confidential can be a challenge, but working with an M&A advisor or business broker can make it easier. Business brokers are adept at managing inquiries from potential buyers and initiating contact with prospects, all while ensuring your name and company remain undisclosed. If you're selling your business on your own, there are several steps you can take to keep the sale of your business under wraps until you're ready to announce it.

To maintain confidentiality during the sale of your business, consider these five steps:

1. Confidentiality Agreement

Have a confidentiality agreement ready for presentation to serious, qualified prospective buyers. This necessary agreement can be provided by your broker, prepared by your attorney, or obtained through a legal form shop or website. In any case, be sure your attorney reviews the form and that it includes a clause that ensures mutual confidentiality, along with an expiration date that allows the confidentiality assurance to expire after a designated term.

2. Establish Private Communication Channels

Establish a private email account for use exclusively when communicating with prospective buyers and business sale team members. Select an address that reveals neither your name nor your business name, for example landscapingoffer@, or even a lineup of random letters and numbers.

Direct phone calls to a nonbusiness number. Avoid using your personal phone number, as employees and others may quickly recognize it, and others can use a reverse phone number lookup to learn the name and address associated with the number. When calls come through, be prepared to answer in person or with a voicemail message that conveys appropriate greetings without revealing your name or the name of your business.

3. Letter of Intent

Wait for a signed letter of intent to purchase before sharing proprietary processes, trade secrets, client lists, or financial details about your business. Your sale listing likely displayed annual revenues and owner’s cash flow, along with asking price. Do not share further financial details, even with a signed confidentiality agreement, until the prospective buyer has demonstrated clear intent and ability to purchase.

4. Develop a Script for Employees and Associates

Be prepared for questions from employees and associates who may suspect your sale intention. You can be truthful without announcing your plan. You can say you are developing an exit plan to ensure ongoing stability for your business. Or you can say you’re talking to potential partners or successors, without stating you will be leaving the business near-term.

5. Exceptions to the Rule

Be aware that while confidentiality is essential in most business sales, there are exceptions, such as in the following situations, where confidentiality could hinder the sale effort. Use your judgment regarding whether scenarios such as these apply to your situation:

• A business located in a rural market that operates as the only business in a certain category.
• A well-known and respected business in a local market area that would benefit from widespread knowledge that the brand is for sale.
• A fire-sale scenario, for example, an owner has suddenly died, and the business is no longer operating.
• A sale to employees, a partner, or a family member.

If you want to maintain confidentiality when selling your business, be prepared to provide a confidentiality agreement to serious and qualified buyers. Set up a private communication channel solely for prospective buyers to protect your personal and business identity until you are ready to disclose it. This will help prevent employees and others from becoming aware of the sale and causing concerns within your business. With a business broker handling inquiries confidentially, you can have peace of mind to continue running your business during the selling process. To find a business broker to help you sell your business, visit the BizQuest Broker Directory.