Can You Sell My Business Without Telling Anyone It's For Sale?

"Can you sell my business without telling anyone it's for sale?" a question California business brokers and agents are asked frequently when meeting with potential small business owners thinking of selling their business.

Owners of small - to medium-sized private businesses are justifiably concerned about their ability to maintain a high level of confidentiality when considering selling their businesses. The main reason is the highly competitive nature of business. You could have an exclusive arrangement with a supplier who, if he became aware that you were contemplating selling, might be encouraged to transfer the supplier agreement to a competitor. Customers who are concerned about ongoing source of supply and continuity of both quality and delivery might be inclined to search for another supplier if it became known that your business was for sale.

Key employees often become very concerned about security and opportunities for advancement if the company for which they're working is known to be for sale. Of course, competitors would just love to know that your business is for sale because then they would be able to go after your customers, your exclusive suppliers, and your best employees.

The most common sources of confidentiality breaches are:

• The immediate family of the seller
• Trusted Friends and confidants
• Employees
• Bankers
• Professional advisers such as law firms, accountants, etc.

Maintaining confidentiality is not a simple task. It is a complex, interlocking process that has to be methodically practiced. The methodology that we believe most successful in maintaining confidentiality is using a business intermediary, an attorney, CPA or some other third party to act as a filter between the owner of the business and the prospective purchasers.

Great care needs to go into marketing materials to ensure they do not provide clues to a purchaser as to which business is for sale. It is also important to de-identify all selling material and documents until the buyer is adequately qualified. Ensuring that all prospective purchasers are qualified to actually receive information about the business is a key part of maintaining confidentiality and should be carried out by your intermediary. A critical first step is to have any prospective buyer sign a confidentiality agreement.

The potential buyer should provide a credible third-party reference (accountant or banker) to attest to his financial capability to purchase the business. Another important aspect of qualifying a prospective purchaser is to establish his or her integrity and reliability. What do the business owner and his or her intermediary know about the prospective buyer? Does the prospective buyer inspire confidence or doubt?

This is an area where a great deal of experience in selling businesses comes in very handy.

If you're contemplating selling your business in the not too distant future, then it's important that you think about what degree of confidentiality will be required. For instance, if you own a gas station or dry cleaner, confidentiality won't be a major concern... Your customers are more interested in your convenient location than in who's running the ship.

That's why you often see businesses such as these advertised openly in the business opportunities section of newspapers. Because selling your business is a complex process, owners of larger companies should plan far in advance for the eventual sale and keep that planning confidential from the earliest stages.