Unlike when selling a house - when you would (normally) want it marketed to the whole world - selling a business is a completely different animal.
For many business owners, confidentiality is critical when they go to sell, for various reasons. Three of the more common reasons we see business owners wanting to keep their intent to sell private are:
Fear of losing employee loyalty
Fear of losing existing and/or new clients
Fear of gossip in the marketplace
All valid reasons for some businesses - but not all. Other business owners have no problem when it's time to sell to market it to the world, openly. In fact, there are three types of clients we generally see when selling businesses...
3 Types of Sellers
1. The "Bring it on!" Seller
This seller wants full open marketplace marketing and exposure to garner the most activity and interest possible. While financials will always be confidential until Non-Disclosure Agreements are executed and a prospective buyer can show some sort of proof of funds / financial ability, this seller has no problem with the world knowing their business is for sale. And, the reality is, in most cases this is the best way to approach the sale of your business if your business / client / employee relations and personal feelings allow you to handle it this way.
But for many, this may not be an option due to one or more of the fears mentioned earlier. This brings us to the second type of seller client...
2. The "Semi-Anonymous" Seller
This seller wants the business listed on all of the local and international marketing channels we use, but prefers anonymity. Once a potential buyer has executed Non-Disclosure Agreements and has provided proof of funds / financial ability, and the seller is in agreement to disclose more information, we will do so - to this buyer only. This practice is fairly common, and allows us to market the business locally and abroad heavily, while keeping the business name and identifying details private. While it does cut down a bit on good exposure from local chit-chat and friends of the business spreading the news in a positive way, it offers some balance for those that just need to keep things under the radar for now.
The third most common type of business sellers are owners who really aren't committed to selling just yet, but "if a buyer should pop up looking for this type of business" they would sell for the "right deal"...
3. The "Pocket Listing, Double Secret...Tell Anyone and I'll Kill You...Unless They Have Cash" Seller
I kid (a bit...) but this type of situation or mentality is actually quite common. While we will always work with sellers who want us to keep their business in mind when working with our buyers, the sellers who have provided some financials and details to us, and have given us the ability to market it heavily (anonymously or openly) have a much better chance of getting it in front of the right buyers at the right time.
Buyers looking to purchase a business should also know that many times business brokers have a good amount of these "Pocket Listings" which are not advertised on their websites, or any other media for that matter, and so they should speak to a business brokerage firm to inquire about any listings not being marketed openly or anonymously.
Having worked with all three types of clients, and after having sold businesses personally for ourselves, I generally recommend the following:
If you have no issues with employee / client relations in potentially selling your business, bring it on! If you need some anonymity, have it listed anonymously, then if eventually you have a change in situation where you can have it marketed more openly, move it up to "bring it on!"
If you would like to sell your business but don't want it out on the market even anonymously, you should still talk to a professional business broker to see all of your options and perhaps see if it is possible to mitigate some of the risks (real or perceived) of exposure. At the very least this may help you understand the process and assess whether or not you should at least have your business marketed anonymously. This may also help you balance your goals and fears, and at least get it in front of the right team and eventually the right potential buyers.
But, here is the most important key...
When it comes to confidentiality (financial and other), make sure you are working with a professional team set up and accustomed to transacting business this way. One of the real main benefits of working with a business specific intermediary is the sensitivity to handling your privacy, and the ability to bridge the confidentiality between two parties. Buyers want confidentiality as well, therefore getting a buyer and seller together in a business sale without the right intermediary, due to the need for privacy or anonymity, is near impossible.
Some of the other benefits - besides marketing and confidentiality - to using the right business brokerage team are: valuations, handling issues such as non-compete clauses (important!), smooth closing process, assistance in verifying records / data, assistance in identifying business stigma (when buying), among others. More on these in future posts!
Wanna chat about selling your business, or buying one? Just click or call...and yes, we'll keep it just between us, unless you want to bring it on!
Tony is the owner of Coastal Commercial Group LLC, Limitada, in Flamingo Costa Rica. Coastal Commercial Group specializes in Commercial Real Estate and Business Brokerage - helping businesses position and sell, and helping buyers buy businesses and investment properties, navigating through proper valuation, permitting and legal issues. Should you wish to have a chat about the commercial real estate / investment / business market in Guanacaste Costa Rica, reach out and contact Tony here. You can also find out more information at www.CommercialCR.com or CRBusinesses.com and follow us on Facebook