Why Business Brokers Use ‘Blind Ads’

Blind Ads Protect Seller’s Confidentiality

When it comes time to put their business up for sale, confidentiality is critically important for most business owners. They do not want their employees, customers, suppliers, landlord, or the general public to know that their business is up for sale. A confidential sale avoids the tremendous disruption that often arises due to the uncertainty and fear surrounding possible business sales. For this reason, professional business brokers advertise businesses through ‘blind ads.’ Let’s explore the specific reasons of why business sellers use ‘blind ads’ to sell their business, with common examples that help explain the consequences of not using ‘blind ads.’

What is A ‘Blind Ad’

A ‘blind ad’ is an online ‘business for sale’ advertisement that does not reveal the actual name of the business nor even the specific location of the business (other than a broad geographical area such as county). A ‘blind ad’ generally describes the business including its sales, profits, and other pertinent information which enables a prospective buyer to gain a general understanding of the business. Pictures of the business are never in a ‘blind ad’ since viewers may discern its identity. Verbiage in a ‘blind ad’ that describes the business still maintains the seller’s confidentiality and should not allow a prospective buyer to discover the true identity of the business by any means whatsoever.

Eliminate Business Disruption

• During the business sales process, the last thing that a business seller wants is for their business to be disrupted.
• Unless the business for sale advertisement is a ‘blind ad’, anyone (whether a serious buyer or not) will know what specific business is being advertised and hence the exact location and telephone number of the business.
• Such ‘buyers’ may thus simply call or walk into the business establishment, and attempt to talk to the owner about the business sale.
• Needless to say, this is a totally inappropriate way to discuss such a sensitive and confidential issue.
• Other customers and employees may be within listening range of the conversation between the buyer and seller, and will thus be made aware of the sale along with any details discussed.
• Further, the seller’s broker will be shut out of the discussion, and the seller will be unprepared for this sort of ‘ambush’ by potential buyers.
• No business owner will want to be approached in such an inappropriate manner because of the obvious potential for business disruptions.
• Prior to disclosing the actual identity of the business to any potential buyers, a professional business broker has all prospects complete and sign a Non-Disclosure Agreement which protects the confidentiality of the sale.
• An NDA mandates that all contact between the buyer and seller be handled confidentially through the involvement of the business broker.
• The NDA further prohibits the prospect from using the company’s information for competitive purposes and for disclosing the potential sale to any third party.

Employees Quitting Major Risk

Without a ‘blind ad’ protecting the confidentiality of the business, it is quite likely that word of the sale will get out. It will not take long before the employees of the business learn about the potential sale. When employees are made aware of the potential sale, they frequently feel insecure about their job status. After all, employees have no idea who the buyer of the business will be and whether they will still want to keep them as employees. Employees may also fear that the new buyer will create a less hospitable workplace or lower their wages. Unfortunately, competitors also frequently attempt to steal the employees of a business known to be for sale. Such competitors realize that the employees are vulnerable and probably in fear of their job. These unscrupulous competitors prey on such fears, and find ways to contact the employees in order to lure them to quit their jobs and work for them.

Example of Employees Being Stolen By Competitors

• Let us assume that Jane owns Jane’s Hair Salon and has decided to advertise the business online herself.
• The advertisements that Jane has placed online are not confidential, and viewers may easily discern that it is Jane’s Hair Salon for sale.
• Unfortunately, because the advertisements are not confidential, the sale of the salon becomes known by Jane’s employees and competitors.
• Jane’s employees consist of four hair stylists, and they become worried about who the buyer of the salon will be, whether the pay structure of the salon will change, and even whether the salon may close if no buyer is found.
• Thus Jane’s employees are very vulnerable and in fear of their jobs for which they rely on to take care of themselves and their families.
• Alex owns a competing hair salon nearby and is looking for hair stylists to hire.
• Alex sees or hears about the advertisements that Jane has posted online, and decides to surreptitiously contact Jane’s stylists.
• Alex offers the same commission rate that Jane’s stylists are being paid, along with good working conditions and promises of stability.
• Jane’s stylists quit, leaving Jane with very little value left in her salon.
• This scenario could have been easily avoided had Jane trusted the sale of her salon to a professional business broker who would have placed a ‘blind ad.’

Competitors May Steal Customers Without ‘Blind Ads’

In addition to the risk of stolen employees, advertising a business without using ‘blind ads’ also subjects the business to losing customers. Competitors are always looking for an edge in order to gain new business, and many competitors are more than willing to use the knowledge that a competing business is for sale in order to steal customers from that business. This may occur by competitors simply telling customers that a competing business is for sale, and thus can not be trusted to serve their future needs.

Example of Competitors Stealing Business Customers

• Let us assume that Jim is a physical therapist and owns Jim’s Physical Therapy Center.
• Unfortunately Jim (like Jane) places a non-confidential business advertisement online in his desire to sell his physical therapy business.
• Because the advertisement is not a ‘blind ad’, a nearby competitor sees the ad and decides to take advantage of the fact that Jim’s business is for sale.
• This competitor knows that Jim gets most of his patients from a certain group of referring physicians.
• The competitor approaches this group of referring physicians and tells them that Jim’s business is for sale, and thus their patients may not receive the same quality of care in the future.
• The group of referring physicians stop giving Jim their business, and decide to refer their patients to the competitor.
• Although competitors do make excellent buyers of businesses, they still must be properly qualified and must sign NDAs prior to receiving the confidential information about the business (including its identity).
• This will prevent them from stealing employees or customers of the business being sold.

In order to avoid business disruption and the loss of employees and customers, business sellers must ensure that their advertisements are properly presented to the public as ‘blind ads.’ This is the only way to protect their confidentiality, and safeguard their business during the sales process.