Can You Keep Your Sale Confidential?

One of the most common concerns we get from sellers is the fear of
their employees finding out the business is for sale and they all head
for the door.  Chances are your employees are replaceable, but know
business owner wants to go through the headache finding and training
new employees.  We almost always recommend to not tell your employees
of the pending sale.  The seller also is concerned about customers,
suppliers, and competitors finding out about the sale.  Customers,
fearing a decline in performance, may switch.  Competitors may spread
rumors.  Creditors may get nervous.

Confidentiality is very critical to the business selling process.  It is one of the main
reasons why sellers choose to use a broker.  A broker is in an
excellent position to maintain confidentiality throughout the process. 
It is very difficult to keep the selling activities secret if you
attempt to sell the business yourself.

At VR Business Brokers, we take the issue of confidentiality very seriously.  We take
every precautions to protect you and your business.  We follow a four step process to maintain confidentiality:

Step 1. Prepare Blind Ads and Listings

'Blind" ads and listings are used by almost all business brokers. However,
writing effective blind ads and listings is difficult. An ad or listing
that's too general won't get a good response.

A 'blind ad' is an advertisement that camouflages the identity of the business in some way. A 'blind listing' is a camouflaged description of
the business in a multiple listing database.

The goal of any business opportunity ad is to attract buyer prospects.
When the identity of the business has to be guarded, though, an ad has to be cautiously worded. When this happens, the ad may lose its effectiveness. The less specific it is, the more it looks like every
other ad.

Step 2. Pre-qualify Buyer Prospects

Screening and pre-qualifying buyer prospects is perhaps the business broker's
most valuable service to protect seller confidentiality. Make sure this
is done in your business selling process.

Business brokerage industry statistics indicate that over 90% of buyer prospects who call on business-for-sale ads are unqualified for some reason. They lack the necessary money, skills or courage to move
forward. We qualify the buyer, not only for confidentiality, but also to make sure we are not wasting our time on people who will never buy a
business.

Step 3.  Register the Buyer

We require all buyers to register with us.  We get background information
on them, signed Confidentiality Agreements, and personal financial
information.

Our simple form asks for the buyer prospect's contact information, acquisition
criteria, and financial disclosure of cash available for the business
purchase. We also ask for a resume and financial statement from
individual buyer prospects, and other relevant types of financially
qualifying information (like annual reports) from companies and buy-out
groups.

We usually conclude that prospective buyers are unqualified if they
don't register. But, if a buyer prospect objects for a reason we find
credible, we require at least some type of third-party reference (like
a local bank reference) to proceed with any disclosure or discussions.

Step 4. Release Information in Stages

The job of protecting confidentiality gets tougher when the pre-qualified and
registered buyer prospect begins to get detailed company information.
Releasing this information in stages is the way skilled brokers manage
this process.

Don't create a package or report that gives the buyer prospect a
complete and detailed 'information download' on the business. Instead,
plan a phased release of financial and proprietary information as buyer
sincerity and trustworthiness is perceived during the stages of
negotiation.

When we list a business, we create an "Business Briefing" which contains
an executive summary sheet (a single page, suitable for faxing), a
narrative section, a financial section, and a section of reprints,
technical disclosures and other relevant materials.

It is only after we have established a relationship that we deliver more detailed information on the business.

Even with the most careful handling, however, rumors are unavoidable. Even a
business owner whose business is not for sale may be approached by
people asking if the rumor is true that their business is for sale!

One good response is to confirm that buyers have approached you over the years
and that such informal discussions often cause the outbreak of rumors.
Another approach is to laugh it off with the "everything's for sale at
a price" comment.

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