Sell Your Business Without Disruption

Business Sales Should Not Be Disruptive

Business owners expect that the sale of their business should not disrupt, disturb, or otherwise interfere with the regular operations of their business. Indeed, the first and foremost role of a professional business broker is to safeguard the confidentiality of the business sale from any party other than qualified buyers. Without a confidential sale that allows the business to remain undisturbed during the selling process, the business owner is unlikely to receive the best possible price and terms. Further, the business owner’s involvement in the selling process should be minimized so they can focus on running their business.  Business owners should not be asked to meet with unqualified or unserious buyers, and all initial communication with prospective buyers should be handled confidentially by the business broker.

Disruptive Business Sales Impair Valuation

Unlike a commercial or residential property sale, one does not put a ‘for sale’ sign in front of a business for sale. The lifeblood of most businesses is its intangible assets including its goodwill, brand name, reputation, employee and supplier relationships, and other attributes which may give the business a competitive advantage in offering products or services better than its competitors. The intangible assets of a business may be impaired by the loss of key customers, employees, or supplier relationships when the confidentiality of the sale is violated. This will in turn drive down the valuation of the business, or even make the business worthless in a worst case scenario. Selling a business without disruption entails protecting the seller’s confidentiality when procuring a buyer, limiting the seller’s interaction to qualified and serious buyers, and further safeguarding the confidentiality of the sale during the formal due diligence process.

Using ‘Blind Ads’ to Prevent Business Disruption

  • When procuring a buyer, experienced business brokers use ‘blind ads’ as a way to protect the identity of the business from the viewing public.
  • A ‘blind ad’ is not an anonymous advertisement since it does identify the listing broker.
  • This differs from a ‘blind ad’ placed by a business owner hiding their identity while trying to sell their own business as a For Sale By Owner (or FSBO) advertisement.
  • A ‘blind ad’ never contains pictures of the business, the website of the business, or the specific location or city of where the business is located.
  • Importantly, a ‘blind ad’ gives enough pertinent information about the business (such as annual gross sales, annual profits or owner benefit, and general description) in order to attract interest from buyers without revealing the identity of the business.
  • Without a ‘blind ad’ it is very common for unqualified prospective buyers to simply show up unannounced at the place of business in order to talk with the owner about the sale.
  • Needless to say, this can greatly disturb the operations of the business and should never be permitted.
  • Imagine, for example, an unqualified buyer walking into a restaurant unannounced and asking the hostess to speak with the owner about the sale her business.
  • By the end of the day, it is highly likely that the entire restaurant staff will know that the restaurant is for sale.
  • The uncertainty and fear about the potential sale will likely cause staff defections and major disruptions to the restaurant.
  • Even if such a buyer had good intentions, the disruption to the restaurant in this case will impair its value and make a sale much more difficult and less attractive for the seller.

Fully Qualify All Potential Buyers

In order to preserve the smooth running operation of a business during the sales process, all prospective buyers must initially qualify themselves financially as being able to purchase the business and must complete and sign a Non-Disclosure Agreement (NDA). These qualifying steps must be taken before the prospective buyer is told the actual identity of the business. The NDA provides financial and legal penalties in case the buyer breaches the agreement by contacting the business owner directly without the consent of the broker or otherwise interferes with the business by disclosing to any other party that the business is for sale. To further protect the business owner from disruptions, prospective buyers should demonstrate to the broker that they are a right fit for the business prior to meeting the seller in person for further discussions.

Avoid Disruption During Formal Due Diligence

After a buyer and seller have a signed Letter of Intent (LOI) or purchase agreement, the buyer is granted an exclusive period in which to conduct formal due diligence or a thorough investigation into the financials, history, and operations of the business being purchased. Here the business broker must take steps to ensure that the business is not disrupted during this process. Even during formal due diligence, buyers do not have the right to enter the business, speak to the employees of the business, or contact customers of the business without the seller’s consent. Doing so would violate the terms of the NDA and undermine the buyer’s trustworthiness. Further, the buyer may not use the information received during formal due diligence for competitive purposes (assuming the deal does not go through) without running afoul of the NDA.

A non-disruptive business sale starts from the first meeting between business owner to list the business up until the moment that the business is actually sold. The identity of the business being sold should only be revealed to properly qualified prospective buyers. Moreover, business owners should remember that formal due diligence is a contingency of the deal (with no guarantee that the buyer will actually close), and that their business should not face disruption as a result.

Give Martin at Five Star Business Brokers of Palm Beach County a call today at 561-827-1181 for a FREE evaluation of your business.