Confidentiality is key in a business sale. It sounds counterintuitive in a way, doesn’t it? After all, when you’re selling something, you want to let as many people as possible know. Not only do you gain profit faster this way, it also allows you to tweak the price a bit to your advantage. But selling supermarkets is not like selling hot pies; the success of the transaction—and how much profit you earn—can depend on how well you can keep the business sale confidential.
Most proprietors who sell their business hire a business broker whose responsibilities often include helping them keep the sale clandestine. Confidentiality agreements are also issued to potential buyers to prevent leakage of information. Why go this far to keep the sale a secret, you ask?
- It prevents competitors from compromising your reputation and the sale. Imagine what your competitors could do with the information. All that’s needed is for them to let your customers know that your business is in the market. This is often enough for clients and suppliers to hesitate to do business with you, which may have a negative effect on your store’s performance and its value.
- It helps prevent a lot of employee-related issues. Nothing scares many employees more than the prospect of losing their job. If they were to learn about the business sale, they’d wonder about the stability of their employment. Will the new management keep them or will they be let go? Will they have the same benefits? The doubts and the questions can have a negative effect on their morale, which may lead to them quitting or lacking the motivation to perform their duties.
- It maintains the buyers’ interest. Your prospective buyers are most likely buying the store as an investment. This is enough reason for them to prefer an airtight transaction because as mentioned above, an information leak can affect their investment’s value and its capacity to deliver their desired returns. Additionally, the lack of confidentiality can invite more than a few buyers. Buyers who want exclusivity can be discouraged from continuing with the sale.
- It helps you maintain normal business operations. Confidentiality allows you to go on doing business as if nothing extraordinary is happening. Imagine if everyone knew about the business sale. You’d most likely entertain many phone calls, appointments and ocular inspections every day, disrupting your operations and negatively affecting your staff, customers and your store.
- It helps you select the best buyers. Keeping the business sale confidential gives you a certain amount of control, especially on who takes over your business. You can opt to provide information only to those who can pay and care for the business you spent time and effort growing.
In a conventional retail transaction, a buyer pays to own an item. Selling a supermarket follows the same principle, but with a lot of other factors involved—finances, leases, government regulations, your staff and your competitors, to name a few. Confidentiality helps limit the factors that can affect the sale and lets you focus on choosing the right buyer and the best value for your business.
Do you know of other reasons why a business sale should be under wraps? Share it with us in the comments.