Keeping it Confidential

Confidentiality is usually critical to the business selling process. Confidentiality is important for a variety of reasons. Customers, competitors, employees and creditors all will have different reactions to finding out that your business is for sale. Buyer prospects themselves often react negatively to a business opportunity that has not been kept confidential.

2misi.com

http://www.2misi.com/article/2012/07/keeping-it-confidential

As a seller, you may not want your employees, customers, competitors and creditors to know that your business is for sale. Employees, fearing the unknown, may quit. Customers, fearing a decline in performance, may switch. Competitors may spread rumors. Creditors may get nervous. For your business, a breach of confidentiality may spell disaster because any one or more of these reactions can happen.

But, even if confidentiality doesn't seem important in the short run, at least one major problem may arise when the business remains on the market for an extended period. If your business is known to be for sale for too long, it may appear to be 'shopworn merchandise' to buyer prospects. This drives the price down. It may even make your business impossible to sell.

Here are the three steps most supervisors take to ensure maximum confidentiality for their clients.

Step 1: Prepare Blind Ads and Listings

'Blind' ads and listings are used by almost all business supervisors. However, writing effective blind ads and listings is difficult. An ad or listing that's too general won't get a good response.

A 'blind ad' is an advertisement that camouflages the identity of the business in some way. A 'blind listing' is a camouflaged description of the business in a multiple listing database. The goal of any business opportunity ad is to attract buyer prospects. When the identity of the business has to be guarded, though, an ad has to be cautiously worded. When this happens, the ad may lose its effectiveness. The less specific it is, the more it looks like every other ad.

"Manufacturer for Sale. Call Supervisor." will get a minimal response. Describing the business for sale as a "Manufacturer of low tech product" will get a better response. "Manufacturer of low tech product in high tech market" will get the best response. Adding details to an ad usually improves response.

The more details you add, however, the more you risk breaching your own confidentiality. Remember that there may be competitors and employees reading your ad. They can be pretty creative in assembling information from different sources! This is especially true if they already suspect something.

The business supervisor usually has many businesses for sale which attract buyer prospects. Buyer prospects respond strongly to ads which indicate that the supervisor has a wide variety of business opportunities, even if the individual business descriptions are vaguely worded. The supervisor can then mix and match buyer prospects and listings.

The supervisor may also have more than one like kind business for sale, further helping to mask the specific identity of any particular business. If a supervisor advertises five manufacturers, for example, buyers will call on the ad anyway even though no more information is provided. The fact that the supervisor has five such opportunities is sufficiently compelling to get the desired response.

Step 2: Pre Qualify Buyer Prospects

Screening and pre qualifying buyer prospects is perhaps the business supervisor's most valuable service to protect seller confidentiality. Make sure this is done in your business selling process. Establish a process of screening and pre qualifying prospects before the first ad appears.

Neither consultants nor sellers can afford to spend time answering detailed questions posed by these often well intentioned, but nevertheless unqualified, 'tire kickers.' If you are selling without a supervisor, don't forget to establish a separate phone service, email or postal address to receive inquiries. You don't even want to think about handling buyer responses without a buffer between you and the unqualified tire kicker.

Prepare a form to record information about the buyer prospects as each contact is made. Prepare a short 'script' to answer the questions you anticipate without giving away the identity of your business. It will take some experience before you know what questions buyer prospects will ask. Also give some thought to what type of buyer you want. How much cash do they need to buy your business? What minimum skills and background must they have? How are you going to ask for, and collect, this information?

Step 3: Register Buyer Prospects

Supervisors require buyer prospects to provide background information about themselves and to sign a confidentiality (or non disclosure) agreement. Our simple form asks for the buyer prospect's contact information, acquisition criteria, and financial disclosure of cash available for the business purchase.

It can be tempting to relax buyer prospect qualification requirements. Both supervisors and sellers are naturally enthusiastic about new prospects. It is always exciting to have the phone ring. This feeling is even more intense if there hasn't been much response to the marketing effort, or if a negotiation has just fallen though and the seller is 'on the rebound.'

A sincerely interested and qualified prospective buyer will almost always be courteous, understanding and compliant with a registration and pre qualification process that is fair and reasonable. It is critical, even at the level of the smallest business, that you know who is trying to buy your company.

How to Boost the Value of Your Business

There's no arguing that banks, potential investors and creditors look heavily to a company's financial statements to determine its value. However, past financials often aren't the whole story. Here are some additional factors to consider as you seek to maximize your company's value - whether you plan to sell soon or simply want to be ready when that day comes:

2misi.com

Proven Potential for Increased Profitability

 

Perhaps the most important aspect of making a business attractive to a potential buyer is building their confidence that the business has the potential for increased profitability. Of course, step one is to produce documentation showing steady, reliable revenues and cash flow, but other steps can help paint a picture of untapped potential. For instance, highlighting (and proving) key advantages inherent in your businesses industry such as a history of the sector outperforming the economy at large or examples of recession resistance will demonstrate that your business carries less risk.

Regardless of your business' financial track record and your sector's inherent advantages (or disadvantages), a key way to build value into you business is to create a plan that will drive future growth. If you plan on continuing to operate the business, such a plan will help you think strategically and advance the business despite day to day operating demands.

If you plan to sell your business, experience has shown that owners who offer a clear, focused plan for growth have an easier time generating buyer interest and closing the sale. Your plan might detail strategies such as acquiring competitors, expanding to a complementary product or service, or implementing operational efficiencies. 

Be Organized

It sounds simple, but it's hard to do. Good organization will help you run your business more efficiently and reduce employee (and customer) confusion. When it comes time to sell, potential buyers will find the business and the operations easier to understand. At such a point it will be especially critical to have your books in order to provide credibility and to instantly make your business more attractive to potential buyers. No buyer wants to take over a disorganized business.

Focus on Physical Assets for Debt Financing

Buyers of businesses with tangible assets - capital equipment or owned real estate for example - are having greater success securing purchase loans. Though intangible assets, like intellectual property, knowledge and relationships, are all important parts of your business, they often don't come through in a financial statement.

Tangible assets, on the other hand, can be used as collateral to secure lending from banks. Focus on highlighting the tangible assets within your business, and supply potential buyers with a comprehensive list to give them a leg up when applying for loans.

Highlight the Positive

Finally, when the time comes to meet with potential buyers, concentrate on the strong points of your business. You know the business better than anyone else and there are bound to be some areas where your business excels, so make sure you highlight those. For example, perhaps your business is established within its trade sector and known throughout the community or maybe your customer base is widely diversified, providing security against any one customer having too much leverage. Highlighting what makes your business special will make you stand out to buyers and illustrate why your business is a good investment.

Whether you are ready to take steps to sell your business today or just wanting to build value for a future sale, following the tips above will help ensure success.

http://www.2misi.com/article/2012/06/how-to-boost-the-value-of-your-business