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Calhoun Companies is pleased to share a series of excerpts from our book, A Simple Introduction to Selling Your Business. CEO Andy Kocemba has compiled content to help business sellers understand the process – everything from deciding if selling your business is a viable option to preparing for a sale and maximizing value for both parties. It’s based on the most common questions asked by sellers, and the insights gained through over 100 years in business and 1,000’s of successful transactions.
From the onset, one of the primary concerns of any business owner interested in selling is how to keep their actions confidential. They might say, “I don’t want my customers to know I’m thinking of selling,” or, “My employees can’t know what I’m planning.” While a business owner ultimately must be prepared for the word to hit the street, there are ways to manage the sale to maintain confidentiality as long as possible.
Any advertising on a business that is for sale should be “blind advertising.” The goal of blind advertising is always to drive inquiries, not to reveal the business. Ads should be written generically, stating the industry, approximate size of the business, and possibly general location, but nothing that would lead anyone to know specifically what business is for sale. Depending on the industry and number of similar businesses in the geographic area, some of these ads can be more specific than others, but always ask yourself, “Can someone tell who I am based on this ad?”
Confidentiality Agreements and Buyer Qualification
Once you are attracting the attention of potential buyers, it is imperative they sign a legally approved confidentiality agreement before any of your information is released to them. If your sale is being managed by a broker or mergers and acquisitions professional, this form will be signed before they even reveal the name of your company. This is also the time a buyer will be qualified to see if they have the means and the ability to buy your business. If not, there is no need to release any confidential information to them.
Another note on qualification: work with your broker/M&A professional to talk about who the best buyer might be. In some industries, competitors and suppliers might be a perfect fit to buy your company. For other industries these would be the last people you would ever talk to. Deciding this from the beginning of the process can greatly assist in maintaining confidentiality.
Be Ready to Answer
Ultimately, customers and employees may start asking you if the business is for sale. This question may be innocent enough, so it is best to always have an answer ready for anyone that brings up the subject. My favorite strategy is to play it off in a lighthearted fashion. Responses such as, “Everything’s for sale for the right price,” or, “Did you bring your checkbook?” defuse the situation quickly and put the pressure back on the asker of the question to reveal their motives.
Manage the Process
A signed purchase agreement doesn’t mean the need for confidentiality is over. Make sure you and your buyer have a clear understanding of when employees will be told of the sale. While some key employees may need to be drawn into the process earlier on, it is generally best to wait as long as possible to tell employees a business is being sold, often sharing the news after closing the transaction. Until ownership is officially transferred, you never know what might happen, and a deal might fall apart. In that case, it is best employees and customers not be aware of the sale. Remember that maintaining confidentiality through the selling process is important, but it is not an all-or-nothing scenario.
These tips can help you maintain confidentiality by knowing what to share and say, and when. Brokers
and M&A professionals can guide you through this process and lead you to the best results.
By Andy Kocemba
President, Calhoun Companies
A graduate of Bethel University, Andy is energized by his daily interactions with the owners and entrepreneurs behind the Midwest’s thriving small business community. He has also written two books, providing a checklist of things to consider when buying or selling a business. Andy is a member of the International Business Brokers Association, M&A Source, Minnesota Chamber of Commerce, and serves on the board of the Better Business Bureau of Minnesota and North Dakota.