Confidentiality is the core of good business
In today’s electronic world, there is more information readily available to the public. While transparency can be useful in some instances, when it comes to selling a business, more people knowing is not necessarily best. In fact, letting too many people know can have a negative impact on the continuing operation of the business.
When privately placing a business, generic information is used unless a seller specifically gives approval to use the business name or other identifying information. Private placement activities are conducted to attract prospective purchasers, not let the world know that the business is for sale. Until a qualified buyer has met with The Firm and signed a Confidentiality Agreement, identifying business information is not provided. The Firm takes it a step further to safeguard certain details, such as customer and employee information, until a Contingent Offer to Purchase has been submitted and accepted.
Why do we have such procedures in place? Quite frankly, a seller can have a great deal at stake when they list a business for sale, and during the process the business must continue to operate. Consider these possibilities:
- Employees learn that the business is for sale and leave their positions
- Customers learn that the business is for sale and take their business elsewhere
- Competitors learn that the business is for sale and actively target both employees and customers
All these scenarios mean that the business will suffer and a sale will be more difficult.
"One of the core values of The Firm Business Brokerage is "always confidential." This is not just a catchphrase; this is a necessary way of doing business."
- Susanne Miller, J.D.
The seller is not the only one that has an interest in keeping things confidential. A buyer can want to purchase a business for different reasons, such as a new career, expansion of an existing business, or achieving a life-long goal. Again, there are several possibilities to consider:
- An employer finds out that you plan on leaving and there is no firm exit plan in place
- Employees move on to another opportunity because they like the status quo
- Customers take business elsewhere not knowing the level of service they will receive under a new owner
- Competitors use the transfer of ownership to their advantage by playing on the “unknown” future of the business
These are the same stakeholders that the seller is concerned about. In this case, however, the buyer looks at the long-term value of their purchase versus the current operations. Either way, the outcome on the current and continuing operations of the business can be substantial.
If it is so important to keep things confidential, then how does the information get out? Sometimes we have a business owner or potential buyer who wants to tell others about the plan so that they get the information directly from the source. In other cases, a person “in the know” lets it slip in conversation. Rarely does it come from the broker, as there are so many safeguards, including the standard use of Confidentiality Agreements and stringent buyer qualification processes in place.
One of the core values of The Firm Business Brokerage is “Always Confidential”. This is not just a catchphrase, but a necessary way of doing business. When meeting with a prospective seller or buyer, this topic is discussed in detail and a Confidentiality Agreement between the parties is signed before any further discussion occurs. This is the first step in building trust, and one that our clients expect and deserve. The formation of the business relationship can only exist if it is based on trust between parties. If a seller or buyer does not trust the broker or each other, then the relationship will not be beneficial and the ultimate goal – the sale or purchase of the business – may never be reached.