Why Confidentiality Is Important When Selling A Business

Why Confidentiality Is Important When Selling A Business

For many business owners, there comes a time when they want to sell. Maybe it’s to retire or just to move onto something else. Selling a business certainly isn’t uncommon, and it happens all the time in the marketplace.

If you have a business, and you’re sure you want to sell, you may be a little more lax about the confidentiality aspect of the process, or you may wonder why it’s important altogether. Below are some of the biggest reasons it’s critical to maintain discretion when you’re selling a business.

You Can Reduce The Value of Your Business

According to Firmex in their Mid-Market M&A guide, one of the number one things you can do when you’re a business owner who wants to sell is put your focus on optimizing value. You want your business to represent a genuinely valuable commodity that a buyer is going to pay top dollar for, otherwise you’re doing yourself a disservice. Consider this, however. You have a business and word gets out that you plan to sell. It can cause anxiety and even desertion on the part of your employees, contractors and customers. Right away your business is going to start losing value if this happens, and you’re not likely to be able to recapture what you’ve lost.

You Lose Control

You always want to be at the helm of your business, your branding, and your overall perception. If information about a possible sale starts leaking out, you gradually start to lose control over all that. It can become a chain of gossip and misinformation extremely fast, and before you know it, you’ve actually lost control as the leader of your business. Even telling a few key people can lead to this type of situation, and the reputation you’ve worked so long to build can be lost.

Competitors Can Hijack the Situation

What happens if your competitors get word that you’re selling your business? In many cases, it becomes a prime piece of leverage for them to use as they’re working to lure your customers away. It gives them the perfect opportunities they need to position themselves more favorably. It’s not just clients who can be at risk in these situations. Often your competitors can use it as a time to steal your key employees, or gain new relationships with your vendors.

Terms May Change

If you have longstanding relationships with certain suppliers or creditors, and they catch wind you’re planning to sell, it can not only cause friction in how they deal with you, but they may even tighten credit restrictions, or have you pay all of your debts to them much faster than they would ordinarily.

Ultimately, whether you definitely are going to sell, or you’re simply testing the waters, one of the most important things to keep your business intact and make sure you’re selling on terms that are favorable to you is to maintain constant confidentiality. Make that your priority during the process.

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