What Makes a Deal Close?
For every reason that a pending sale of a business collapses, there is a positive reason why the sale closed successfully. What does it take for the sale of a business to close successfully? Certainly there are reasons that a sale might not close that are beyond anyone’s control. A fire, for example, the death of a principal, or a natural disaster such as a hurricane or tornado. There might be an environmental problem that the seller was unaware of when he or she decided to sell. Aside from these unplanned catastrophic events, deals abort because of the people involved. Here are a few examples of how a sale closes successfully.
The Buyer and Seller Are in Agreement From the Beginning
In too many cases, the buyer and seller really weren’t in agreement, or didn’t understand the terms of the sale. If an offer to purchase is too vague, or has too many loose ends, the sale can unravel somewhere along the line. However, if prior to the offer to purchase the loose ends are taken care of and the agreement specifically spells out the details of the sale, it has a much better chance to close. This means that a lot of answers and information are supplied prior to the offer and that many of the buyer’s questions are answered before the offer is made. The seller may also have some questions about the buyer’s financial qualifications or his or her ability to operate the business. Again, these concerns should be addressed prior to the offer or, at least, if they are part of it, both sides should understand exactly what needs to be done and when. The key ingredient of the offer to purchase is that both sides completely understand the terms and are comfortable with them. Too many sales fall apart because of a misunderstanding on one side or the other.
The Buyer and Seller Don’t Lose Their Patience
Both sides need to understand that the closing process takes time. There is a myriad of details that must take place for the sale to close successfully, or to close at all. If the parties are using outside advisors, they should make sure that they are deal-oriented. In other words, unless the deal is illegal or unethical, the parties should insist that the deal works. The buyer and seller should understand that the outside advisors work for them and that most decisions concerning the sale are business related and should be decided by the buyer and seller themselves. The buyer and seller should also insist that the outside advisors keep to the scheduled closing date, unless they, not the outside advisors, delay the timing. Prior to engaging the outside advisors, the buyer and seller should make sure that their advisors can work within the schedule. However, the buyer and seller have to also understand that nothing can be done overnight and the closing process does take some time.
No One Likes Surprises
The seller has to be up front about his or her business. Nothing is perfect and buyers understand this. The minuses should be revealed at the outset because sooner or later they will be exposed. For example, the seller should consult with his or her accountant about any tax implications prior to going to market. The same is true for the buyer. If financing is an issue it should be mentioned at the beginning. If all of the concerns and problems are dealt with initially, the closing will be just a technicality.
The Buyer and Seller Must Both Feel Like They Got a Good Deal
If they do, the closing should be a simple matter. If the chemistry works, and everyone understands and accepts the terms of the agreement, and feels that the sale is a win-win, the closing is a mere formality.
Secrets to Closing the Sale Successfully
There are several things to consider when buying or selling a business. The most important is to listen to the other side. There are always reasons why someone wants something – even if you don’t agree at first. Find out where the other side is coming from, then make a decision on whether you can live with it or not.
Next, whether you are the buyer or the seller, you can not have everything your way. You can’t win on every point or issue. Be prepared to give in on those areas that are not as important as those you feel most strongly about. If you are a seller, you may not be able to get a real high price and a real high down payment. You will have to decide which is more important. The same is true for the buyer. You can’t have it both ways.
Always enter the purchase or sale of a business with a spirit of cooperation rather than one of confrontation. The buyer or the seller, as the case may be, is not the enemy. If the seller wasn’t interested in selling, the business would not be for sale. If the buyer did not like the business there would be no negotiation or eventual sale.
The secret of a successful negotiation is laying out all the points on the table for discussion. It is key to understand where everyone is coming from and to understand what is and what is not important to each party. When there is a sense of cooperation among all of the players, a successful deal will usually result.
Don’t Sell Before You’re Ready
The buyer and seller have both agreed on the sale price and the terms of the transaction. Everyone appears satisfied. As the day of closing approaches, the seller seems less cooperative and more apprehensive about selling the business. Ultimately, the sale falls apart. Who’s to blame? The buyer was ready, willing and able to buy the business, and the seller appeared ready to sell.
The decision to sell one’s business is a serious step – a milestone in one’s life, both personally and professionally. Selling represents the end of ownership. It means, for many sellers, heading into uncharted waters. For others, it is the end of a dream — they built the business, or perhaps even started it. A part of them will always be in the business. So, to the seller, selling the business, represents the end of something and the beginning of something else – pretty dramatic stuff. Often, selling the business means parting with one’s biggest asset – the bulk of one’s wealth. The business can be a very personal thing, like a child is a part of the family.
Some sellers, in the middle of the selling process, suddenly realize just how important the business is in their life. Others realize that after the sale they will have nothing to get up for on a daily basis. This sounds good at first, but upon reflection it really doesn’t sound good at all. These are some of the reasons sales of privately-held businesses may not close. Sellers won’t admit their reason, so they masquerade the real reason behind another.
Perhaps, one of the most critical elements necessary for the successful sale of a privately-held business is the willingness of the seller to sell and move on. In some cases, the owner and the business have grown into one – the business becoming his or her alter ego. Before sellers decide to sell, they should make sure they can separate themselves from the business and are prepared to leave it. Sellers should not attempt to sell before they are ready!
Adding Value to Your Business
If you are considering selling your business, remember that there are positive factors that influence value and those that detract from it. Looking at your business from a buyer’s perspective is important since a prudent buyer will be adding and subtracting these various factors when arriving at an asking price. It is perhaps more important to recognize when the buyer arrives at a price at which he or she will leave the negotiations. Buyers naturally try to buy the business at the lowest possible price possible, however most also have a top price over which they are probably not willing to go. Here are some of the “high value” indicators as well as some of the “low value” indicators to consider when evaluating your business.
Indications of High Value
- High sustainable cash flow
- Room for the business to grow
- Anticipated industry growth
- Competitive advantage – location, area, etc.
- Business niche
- History and reputation
- Low failure rate in industry
- Modern, well maintained facility
Indications of Low Value
- Customer concentration on a few major customers/clients
- Reliance on owner
- Poor financials
- Distressed circumstances
- Few assets
- Product or service sensitivity
- Poor outlook for industry – regulations, foreign competition, price cutting, discount stores, etc.
Considering the above factors and how to address them can help a seller look at the business through the eyes of a potential buyer. A professional business broker can help the business owner sort through the many areas that buyers consider when looking at a business and trying to arrive at an initial offering price.
The Small Business Market: Reading Between the “Negative” Lines
Experienced buyers of large businesses have tended to spurn the smaller business, citing traditional “negatives” involved in this type of transaction. Now big-time buyers are throwing away the don’t-buy-small book; or at least, they are beginning to read between the lines. The so-called shortcomings of the small business acquisition can actually be opportunities in disguise.
Let’s take a look at these small-business negatives and see the possibilities or (improvements) inherent in each:
A Good Small Business Is Hard To Find
Experienced buyers often complain about the difficulty of locating a viable smaller business. Furthermore, when a business of possible interest is found, the owner/seller is often trying to manage the transaction single handedly, foregoing the advice of professionals. This negative issue can be resolved instantly by the use of a business broker. For the seller, the business broker will offer the support and expertise needed to launch and consummate the sale. For the buyer, the business broker will pinpoint appropriate businesses for sale, using a knowledge of the marketplace and extensive databases to shortcut the search process.
Business brokers will also be able to present the buyer with small businesses that are not “shopworn,” as can be the case when a business sale has floundered–again and again–in the inexpert hands of the seller. The bigger-time buyers will especially appreciate this, since they are always on the lookout for the unusual and first-time seller.
One Person Is Key
When the owner is also the key employee, what happens after the business is sold? How can the new owners/investors hope to replace the one person who has essentially been the business? This traditional concern paints a far too gloomy–and, in fact, inaccurate–picture. Too many small business owners only think that they are irreplaceable. In most cases, they are not. In fact, new management can bring with it the fresh enthusiasm and energy essential for significant growth. For example, viewed from the outside, the quaint gift shop that is an extension of the personality of its owners might have become just that–too quaint, a clutter of Aunt Susie’s jams, somebody else’s painted beach rocks, aged potpourri. The new management clears out a space to serve gourmet coffees, stocks gift items from an endangered rainforest made by third-world peoples, and the business takes on a whole new life.
Casual Company Structure
Lines of responsibility often blur in the small-business management structure. This problem is compounded when, as in many cases with the small to mid-sized business, the owner is also the manager. Daily concerns override long-term planning, and decisions tend to be driven by instinct rather than by in-depth analysis. The typical informality of small business management is not an insoluble problem by any means. The use of expert, highly specialized consultants and the instituting of an enthusiastic board of directors are two possible initial steps to take. Both groups–consultants and board members–will be invaluable resources to support the existing management and to help formalize the company’s structure. With the burden of managing the business more clearly defined and more equably distributed, a small business will have better opportunities for rapid change and growth.
An additional tip for those owner-managers considering selling their business: Experienced buyers will be more impressed with your business, no matter what the size, if you prepare an operating manual that details the current operation scheme and charts the responsibilities of each employee.
The Owner Keeps the Books
With many small businesses, the owner keeps track of operations and financial reporting procedures–off the cuff or in the head. Even when careful records are kept on paper or computer, the systems may not have kept up with the business and the times. (The operating manual mentioned above will help owners as they plan to sell their business.) The good news for buyers is that the changes needed to update most small business systems will not call for major overhauls. Simple systems improvements can effect dramatic results.
Goodwill Is What’s (Mostly) for Sale
A small business is not typically rich in assets. The investment in capital equipment is minor, and, in the case of S corporations, the majority of earnings go to the owner or owners. What is left to attract the experienced buyer? Mostly goodwill–just what most buyers don’t want to hear. There are, however, two positive sides to the low-assets “negative.” First, it is possible for the new owner to increase assets by the purchase of equipment and by frugal management decisions. Second, the business with a small asset base might receive a lower valuation, which will naturally appeal to any buyer; the experienced buyer will see the further benefit of using the resulting higher cash flow as a means to grow the business.
Leaving the issue of assets aside, most small businesses, in general, are going to sell for much lower multiples than the larger business. A buyer must “buy into” an exit strategy wherein the business will be re-sold on the basis of a higher multiple of earnings as well as simply higher earnings. This strategy has appeal for those buyers who want to buy small businesses at reasonable valuations.
Small Customer/Supplier Base
It is not atypical for a small business to rely on just one customer for 50 percent of its trade, or on a handful of customers for as much as 90 percent. Businesses with such small customer bases (and similarly small supplier bases) survive by cultivating strong relationships and loyalties. This one-on-one way of doing business poses a potential problem for buyers who are doubtful about maintaining these customer-supplier ties.
The seller can alleviate the buyer’s concerns by agreeing to stay on board, as needed, to help maintain key relationships with customers and suppliers. The smaller the customer base–with a few major customers forming the bulk–the more important the seller’s ongoing participation will be. In addition, sellers can use paperwork to their advantage, creating detailed listings of current customers and suppliers, as well as leads to those used in the past or with future potential.
The Uncertain Seller
Is the business really for sale? This is a vital question that any buyer wants answered. In the case of a small business, the decision to sell will involve many emotional factors, including the reluctance on the part of the seller to part with what has been such a large chunk of his life. If the need to sell is caused by family difficulties or by personal burnout, these are fluctuating issues that may leave the seller running hot and cold.
When the seller’s decision-making powers have become skewed, it is wise to enlist the help of a professional. The business broker can assess the seriousness of the seller–as well as that of the buyer. Once it has been determined that both parties are serious, the business broker will keep an eye on the chemistry of each player, fostering patience on the part of the buyer and guiding the seller on a steady path toward a successful sale.
When Selling Your Business, Play to Win
If you are an independent business owner, you are most likely also an independent business seller–if not now, you will be somewhere down the road. The Small Business Administration reports that three to five years is a long enough stretch for many business owners and that one in every three plans to sell, many of them right from the outset. With fewer cases of a business being passed on to future generations, selling has become a fact of independent business life. No matter at what stage your own business life may be, prepare now to stay ahead in the selling game.
Perhaps one of the most important rules of the selling game is learning how not to “sell.” An apt anecdote from Cary Reich’s The Life of Nelson Rockefeller shows a pro at work doing (or not doing) just that:
When the indomitable J.P. Morgan was seeking the Rockefeller’s Mesabi iron ore properties to complete his assemblage of what was to become U.S. Steel, it was Junior [John D. Rockefeller, Jr.] who went head-to-head with the financier. “Well, what’s your price?” Morgan demanded, to which Junior coolly replied, “I think there must be some mistake. I did not come here to sell. I understand you wished to buy.” Morgan ended up with the properties, but at a steep cost.
As this anecdote shows, the best approach to succeeding at the selling game is to be less of a “seller” and more of a “player.” Take a look at these tips for keeping the score in your favor:
Let Others Do the Heavy Pitching
Selling a business is an intense emotional drain; at best, a distraction. Let professional advisors do the yeoman’s duty when selling a business. A business intermediary represents the seller and is experienced in completing the transaction in a timely manner and at a price and terms acceptable to the seller. Your business broker will also present and assess offers, and help in structuring the transaction itself. If you plan to use an attorney, engage one who is seasoned in the business selling process. A former Harvard Business Review associate editor once said, “Inexperienced lawyers are often reluctant to advise their clients to take any risks, whereas lawyers who have been through such negotiations a few times know what’s reasonable.”
Stay in the Game
With the right advisors on your side, you can do the all-important work of tending to the daily life of the business. There is a tendency for sellers to let things slip once the business is officially for sale. Keeping normal operating hours, maintaining inventory at constant levels, and attention to the appearance and general good repair of the premises are ways to make the right impression on prospective buyers. Most important of all, tending to the daily running of the business will help ward off deterioration of sales and earnings.
Keep Pricing and Evaluation in the Ballpark
Like all sellers, you will want the best possible price for your business. You have probably spent years building it and have dreamed about its worth, based on your “sweat equity.” You’ll need to keep in mind that the marketplace will determine the value of the business. Ignoring that standard by asking too high a price will drive prospective buyers away, or will at the least slow the process, and perhaps to a standstill.
Play Fair with Confidentiality
Your business broker will constantly stress confidentiality to the prospects to whom he or she shows your business. They will use nonspecific descriptions of the business, require signatures on strict confidentiality agreements, screen all prospects, and sometimes phase the release of information to match the growing evidence of buyer sincerity. As the seller you must also maintain confidentiality in your day-to-day business activities, never forgetting that a breach of confidentiality can wreck the deal.
Sell Before Striking Out
Don’t wait until you are forced to sell for any reason, whether financial or personal. Instead of selling impulsively, you should plan ahead carefully by cleaning up the balance sheet, settling any litigation, providing a list of loans against the business with amounts and payment schedule, tackling any environmental problems, and by gathering in one place all pertinent paperwork, such as franchise agreement (if applicable), the lease and any lease-related documents, and an approximation of inventory on-hand. In addition, you could increase the value of your business by up to 20 percent by providing audited financial statements for one or two years in advance of selling.
Think Twice Before Retiring Your “Number”
The trend is for sellers to assume they will retire after selling the business. But consider this: agreeing to stay on in some capacity can actually help you get a better price for your business. Many buyers will pay more to have the seller stay aboard, thus helping to reduce their risk.
Keep the Ball Rolling
You need to keep the negotiation ball rolling once an offer has been presented. Even if you don’t get your asking price, the offer may have other points that will offset that disappointment, such as higher payments or interest, a consulting agreement, more cash than you anticipated, or a buyer who seems “just right.” The right buyer may be better than a higher price, especially if there is seller financing involved, and there usually is. In many cases, the structure of the deal is more important than the price. And when the ball is rolling, allow it to pick up speed. Deals that drag are too often deals that fail to close.
By following these tips, and by working closely with your business broker, you can have confidence in being a seller who, like John D. Rockefeller, Jr., doesn’t “come here to sell.” You will play the selling game–and be a winner.
Ten Ways to Cut It
It’s easy to be negative about cost-cutting. “Everything just costs more,” a business owner will say; the subtext being, “What’s the use?”
Don’t give up! There are ways to cut costs. The first step is to identify where the money goes . . . and why. Then look at creative ways to shave off the non-essential while keeping the shape of your business intact.
1. Look Beyond In-House
Outsourcing is the latest word in cost-cutting, and it can mean more than one thing. First–outsourcing labor. Temporary employees or contract workers are the answer for jobs that aren’t included in the daily running of a business. Temps make sense for holiday rush periods or for short-term assignments or campaigns. Outsourcing certain operations, such as photocopying, mailing, and telephone answering, is an increasingly popular way to cut down on carrying these costs in-house. Another, less typical, kind of outsourcing is “hiring” temporary space. If your business needs a conference room only occasionally or only a small portion of a warehouse, consider subletting the space from another business and cut the square footage of your own operation.
2. Don’t Assume Outsourcing Is Always Cheaper
It pays to keep some operations in-house. For instance, if your receptionist can do some on-line bookkeeping while waiting for the phone to ring, or if your warehouse worker can stuff envelopes for a mailing in between delivery deadlines, you should consider these as in-house candidates. In addition, there are some jobs that should stay in-house even if outsourcing may appear to be a bargain–those that involve issues of confidentiality or accounting operations that might help owners and managers to better understand the business.
3. Take Advantage of the “Free Lunch”
It may be food for thought instead of steak, but there are many free offers of benefit to business owners. Continuing education lectures, SBA seminars, informational evenings offered by local banks and corporations are often free or inexpensive ways to hone business acumen. Try these before going the more expensive route via consultants.
4. Go Electronic . . .
If you haven’t yet substituted a voice mail system for a receptionist, you are paying an unnecessary yearly salary. Using e-mail can replace the need for most correspondence–saving the cost of a secretarial salary, or at least full-time. Computer programs for bookkeeping and for riding herd on inventory and payroll can also reduce employee numbers or hours. Selling on-line is cheaper than traditional advertising, and the individual targeting may pay off in more “hits,” further reducing the cost of doing this particular type of business.
5. . . . But Don’t Get Shocked
The cost of sending faxes, using cellular phones, and certain on-line services can get lost in the glow of their convenience. Monitor the use of all such devices. If charges seem unreasonable due to the service provider’s fees instead of employee usage, negotiate with the carrier or provider. When threatened with a loss of business, they will often lower fees or at least negotiate payment schedules. Another electronic cost-saver: run certain equipment during off-peak electricity hours and save up to 30 percent annually in electric bills.
6. Shop Around
Don’t be a slave to recommendations. If your computer consultant has a “pet” equipment source, or your graphic designer has a favored printer, make a few calls to see how the prices stack up. You could end up with big savings for very little effort. The same holds for seeking financing. You should always talk to at least two banks, looking for the best loan terms and interest rates.
7. Offer Discounts; Take Discounts
By offering customers early-payment discounts, you can “borrow” their money instead of the bank’s. Compare the advantage of doing this against borrowing from a lending institution and see which works best for you. You can also be on the other end of discounting by checking out what may be available. It sometimes helps to join a professional organization, in order to get the best discounted rates on anything from advertising to shipping services.
8. Purchase from the Source
If you deal in a product, go to the source whenever you can. For example, the owner of a children’s clothing business specializing in sweaters goes directly to the spinning mill for her yarns. Not only can she specify the exact colors she wants, but she can shop for bargains and negotiate the best prices without any costs added by the knitting factory.
9. Curry Favor
Try to cultivate business favor by patronizing one operation per service. Be loyal to one printer, photographer, designer, or copy service, and they may repay you with reduced fees and/or discounts.
10. Understand that Deductibles Still “Cost”
A deductible expense is still a cost. The only “free” part is whatever your specific tax rate will allow you to deduct, which could be as low as 25 percent, perhaps even less. When tempted to splurge on a deductible expense, always look at your profits and see how much you’d have to earn in order to justify it.
The Entrepreneur: Both Sides
Strong Points
- Flexible and positive attitude
- Creative and comfortable with risk-taking
- Goal-focused and committed to success
- Organized
- Energetic
Weak Points
- Impatient with achieving goals
- Distractible; tolerant of interruptions
- Distrustful of “the new” (especially technology)
- Tendency to stray from business plan
- Failure to delegate authority and tasks
Success in the 21st Century: Do You Have What It Takes?
Now that we crossed that much-heralded bridge to the 21st century and once on the other side, there will be new challenges, but many of the secrets of succeeding in independent business will remain the same. Ask yourself the following questions to see how you measure up to these old-and-new standards of entrepreneurial excellence:
Are you in step with technology?
The 21st century will usher in a brave new world of marketing and financial transactions. The successful independent business person will be in touch with opportunities offered by technology for one-to-one marketing. For example, instead of advertising in print and on radio or TV, businesses can target and reach customers far more directly–through their personal computers.
Marketing on-line will be closely aligned with electronic monetary transactions. This phenomenon will have myriad repercussions on everybody from checkbook printers to the U.S. Postal Service. Many concepts, such as discounts for prompt payment, will cease to have meaning as electronic transactions will narrow and then obliterate the time-lag between receivables and payables. Savvy owners and managers will be prepare themselves now to sign onto these new ways of doing business.
Are you flexible?
A recent survey of successful small business operations revealed that 54 percent of respondents named flexibility as one of the secrets to their success. Today’s great product or service could well be obsolete tomorrow, as it becomes increasingly difficult to forecast the competitive environment, new developments in technology, and consumer trends. Success in the next millenium doesn’t just mean riding the tide of change; it means being the first to get to shore.
And when you refuse to be flexible? Consider this classic bad example from the world of big business: Apple Computer’s failure to foresee the wisdom of licensing rights to its Mac operating system. This failure in flexibility opened the door–and Windows–for Microsoft, thus initiating its own decline.
Are you focused?
Flexibility must be balanced with focus. The readiness to expand or diversify should never threaten the “heart” of the business. As the winds of change blow stronger, knowing the true strengths of a business and having a keen sense of its niche value is essential.
Here’s a good once-small-business example of focus: Krispy Kreme Doughnuts, the North Carolina-based company that began with one small shop in 1942. It’s going stronger than ever with new franchises all over the country, and has seals-of-approval from The New Yorker and other trend-setting publications. Ignoring the concept of multibranding, Krispy Kreme sells only its trademark doughnuts, and they are (literally) hot.
Do you have a plan?
The key to balancing between too flexible and too rigid is a good business plan. Although rapid change may make a five-year plan too long-range, the length of vision is not as important as its intensity. The chief value of a business plan is the hard thinking that it engenders. Planning forces business owners and managers to face issues head-on, examining closely the virtues versus the pitfalls of whatever next steps the business might take.
Although the good business plan will contain, in writing, goals that are specific, realistic, measurable, and time-driven, this document will mean nothing without the correct entrepreneurial spirit behind it. Successful business owners live by their goals. This has never been more important than it will be in an age where variables increase exponentially in every possible area–new competitive products and services, technological advances, industry trends and changes.
Are you prepared for your “next life”?
Once you’ve made it into the land of the successful (or you’re tired of trying to get there), what next? One of the signs of a wise entrepreneur is knowing when to make a graceful exit. Business owners who believe they should consider selling only when business is down are missing another opportunity to be a winner. Good timing is the secret to selling success. Instead of waiting for bad times, either in the business itself or in the marketplace in general, sellers should understand that last year might be too late.
A professional business broker can make selling an educated process, doing everything from accessing national and international data bases for marketplace information, to advertising and qualifying buyers, to handling the complex paperwork necessary for the completion of the sale. The business broker will also present and assess offers and, at the appropriate juncture, will help in structuring the sale and negotiating its close.
Even if exiting your business is a step you won’t take until the next millenium, it’s not too soon to create a strategic exit plan. After overcoming the challenges of making a business successful, the final triumph for the owner is profiting from its successful sale.
When Selling Your Business: Confidentiality Is Key
You’ve make the big decision to sell. Your books are in order, you’ve spiffed up the premises. What are you waiting for?
Many sellers get to this threshold and then become concerned about confidentiality. They do not want the news of their decision to reach their customers, competitors, employees, or creditors. After all, they figure, customers may lose confidence in the business and go elsewhere, competitors might use this opportunity to spread rumors, employees might fear for their future security, and creditors might push for earlier payment. Not all of these qualms are reasonable; however, when selling a business, discretion is definitely the better part of valor. Few, if any, transactions have been wrecked due to excessive discretion. A breach of confidentiality, on the other hand, can severely alter the course of the transaction. What can you do to protect yourself against this possible deal-wrecker?
Your first step is to look for expert guidance. When a business broker is involved in the sale, he or she will channel the process to keep the transaction within safely silent bounds. You can expect your business intermediary to do the following:
1. Qualify the buyer.
Screening potential buyers is one of the most important benefits a business broker can provide for you. Keep in mind that roughly 90 percent of those who respond to business-for-sale ads are either not serious buyers or are not financially qualified. By screening prospects, the business broker will contribute to confidentiality by limiting the exposure of the business to the most promising buyers instead of to the merely curious time-wasters.
2. Use appropriate marketing strategies.
How can you advertise a business for sale without spreading the news too far? The business broker, as intermediary, is in an ideal position to do just that. Brokers place advertising and post listings that contain non-specific descriptions of the business. This “blind ad” approach can be phrased to attract interest in the business without revealing its name or exact location.
3. Prepare paperwork designed to promote confidentiality.
After screening prospective buyers and assessing the degree of interest and financial qualification, the business broker will also require prospects to sign a strictly-worded confidentiality agreement.
4. Manage appropriate release of information.
Until a purchase-and-sale agreement has been signed, the business broker can phase the release of information about the business to match the growing evidence of buyer sincerity and trustworthiness.
However, even with the most careful handling, rumors are unavoidable. The wise seller will expect questions from the curious and will be ready with answers. If you find yourself needing to muffle the business-for-sale buzz, aim for a mix of good sense and good humor. You might respond that many buyers have approached you over the years, making “news” before it happens. You could go on to say that you never refuse to listen to a great offer, adding that you are, in fact, all ears right at that moment!
No matter how close-mouthed sellers choose to be with the community at large, they might consider being open with their own employees. This is the group most likely to sense what’s happening, and sharing the news with workers can sometimes be a positive move. Since it’s often the unknown that causes the most anxiety, including employees in the decision to sell can actually calm over-active imaginations. Once enlightened, workers can be made to understand the need for discretion. Confidentiality will help protect their own future as well as that of the business.