When you start to think about selling your company, there's usually two categories of buyers who show up to the table. The first are financial buyers, such as private equity firms, which are popular because they are swimming in cash, pushing up valuations, and few people want to deal with the regulatory hassle of going public when considering a larger transaction.

The second option is the strategic buyer, this is usually someone already in your market  who could benefit from acquiring your complementary business. But there's another way to define a strategic buyer: it's your competitor. If you choose this option to get top dollar for your business, it means you will have to disclose strategic information to a competitor, which is scary. But what happens if you give away all that information and the deal falls through? How do you handle that?

You have to make sure you gradually release information and protect yourself along the way. Here's how to do it.

1. Put agreements in place to protect the business.

Your first step should be have your potential buyer sign a non-disclosure agreement, which makes sure the people you are sharing information with will keep it confidential. If they don't, you have a way to take legal action.

When courting a buyer, you'll have to show them around your business and introduce them to your team. To help ensure the potential buyer doesn't try to recruit your people after meeting them, you also need to have a non-solicitation agreement in place that inhibits them from doing so.

2. Disclose information gradually.

Even when you have agreements in place to protect you, don't share everything about your business yet. You will have to release some sensitive information right away, such as basic financials, including profits, to set a price. But you shouldn't give them too much, like customer names as an example. Instead use pseudonyms, like "Customer 1" or "Customer 2," as a way to protect your business. That should be enough to get an indication of price and a letter of intent.

You can continue to parse out information as the buyer narrows down the price range they're willing to pay. You'll eventually have to disclose more and more details until they can get down to a specific hard number. The point is they don't get that additional information until you already know they are in the zone for the price.

To be fair, if the buyer will pay the price you want, they have the right to check out the business to ensure it is exactly as you describe. This is the scary point, but you can still hold back certain critical pieces of information until after the sale.

I worked with one company that had some secret sauce in how they marketed their product that they didn't disclose until the deal was closed. They also withheld customer names until after the sale. In that case, the buyer was comfortable enough with the risk level to wait until the deal was done to learn those details.

3. Trust your instincts.

Once you have a firm price, you'll have to let them know just about everything about the business. This is usually controlled through a digital data room, which can be as simple as a controlled-access Google Drive. The buyer needs to assess the risk level against the price they're willing to pay.

At this point, you should have spent enough time, in the office and over dinner, to get a sense of whether you trust the buyer or not. This is a gut-level decision. If you don't have a good feeling at this point, don't go any further.

But if you still feel good about selling, the buyer begins conducting their final due diligence before closing the deal--and you can still hold back a few things until the last minute. That might include those customer names, and perhaps some sensitive intellectual property.

The biggest risk at this point is the buyer trying to renegotiate the price. It does happen. But it goes back to that gut check. There will be signs along the way, as to whether you can trust the buyer. Pay attention.

One of my pitches when buying companies was that I will not change my price unless things are materially different than what was disclosed. As long as those surprises were little, we never changed the original price.

So, if you want to sell to a competitor, go about it strategically. Protect yourself with legal contracts and never give away too much information too soon. When you find that sweet spot, you'll not only get a better price for your business, you'll also minimize the risks in case something goes wrong.