Selling Your Business? Protect Your Confidentiality

Balancing buyer questions and retaining your business' confidentiality can be tricky. Laying out a plan can help set what information you can release and when.

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Once you start marketing your business, your business sale will be about all you can think about. Here's some important advice: As much as possible, keep your thoughts to yourself.

Confidentiality is absolutely essential in successful small business sales.

It's important for reaching your own exit goals. And it's important for the success of your business post-sale, especially if you provide seller financing and agree to receive some of the purchase price in the form of future payments from the buyer.

Letting the word leak out prematurely is harmful in a number of ways:

Customers, competitors, creditors and employees become hesitant when a business is for sale, often triggering reactions that can weaken your business momentum and therefore its value.
Prospective buyers become hesitant about purchasing a business if they feel sensitive information has been divulged to others.
Telling even close confidants can launch an unintentional gossip chain. If each person tells only one other trusted friend or relative, news of your sale intentions can spread far and quickly, especially if word gets out among competitors, employees, or others in your industry.

To protect your business and your sale hopes, take the following actions.

Step 1. Advertise your business using blind ads and listings.

Don't share your personal or business name until you've qualified prospective buyers and obtained their confidentiality commitments. And certainly don't announce your name in for-sale ads.
Advertise the nature and strength of your business instead of its name. For example: PROFITABLE PALM SPRINGS FLORIST WITH LONG-TERM ESTABLISHED CUSTOMER BASE FOR SALE.
Direct responses to an address that doesn't reveal your personal or business identity. When placing ads in traditional media, use media-provided P.O. Box or e-mail options that allow you to maintain confidentiality and - a big time-saving bonus - to follow up only with prospects you decide are qualified to buy your business. When using online business-for-sale sites, use the sites' identity-protecting features.

Step 2. Pre-qualify buyers before sharing sensitive information.

If you feel awkward about asking a prospective buyer for financial and business background information before divulging your business name, you're not alone. But realize this:

Qualified buyers expect you to screen buyers before sharing sensitive information.
Qualified buyers care about the privacy of your business information because they want to know that the business they're buying has carefully protected its trade secrets and financial information.
Qualified buyers are serious shoppers and they're ready with the information necessary to take the next steps.

According to business brokers, nine out of ten respondents to business-for-sale ads aren't qualified to make the purchase. That's why pre-qualification is so important. The sooner you learn who can and can't buy your business, the better - both for you and for your ultimate buyer.

An effective way to pre-qualify prospects is to describe your business and response requirements in a way that helps unqualified buyers opt themselves out.

By describing the size of your business and your purchase price, and then by asking interested parties to respond by describing their purchase capabilities, you stand a good chance of hearing only from those who, in fact, are qualified to buy your business.

In every ad you place, in print or online, ask interested parties to respond with information that describes:

What they're seeking from a business purchase
Their purchase timeline
A description of their related business experience
Their interest in and ability to buy your business

You can cover this request in one sentence: Please respond describing your related business background, the type and size business you seek, your investment capability and your interest in this business.

Mike Handelsman is group general manager for BizBuySell.com and BizQuest.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces. @BizBuySell