Confidentiality and the Sale of Your Business

Picture of Katie Fleming

Katie Fleming

Co-founder and COO of Owner Actions

Rolls of papers on confidentiality pertain to the sale of a business.

Owners often wonder whether they should share the news of their sale with others or keep their plans to exit confidential. Experts often recommend full confidentiality when owners sell a business, partly because of the problems that exit announcements can introduce.

These problems, which could include rapidly declining sales, strengthening competition, turnover of key employees, and the dispersal of your most confidential information among buyers or key players in your market, have the potential to devalue your business. And, importantly, they can scare away your pool of potential buyers—or drive them to make a significantly lower offer for your business.

But, with careful consideration, you may find that “full” confidentiality for your business isn’t your smartest play. This is especially true when it keeps you from sharing the right information about your business at the right time and to the right audience.

Let’s dive in.


What is the smart play?

Smart business owners often find that the right choice is “measured confidentiality.” They share just enough information about their business and plans to exit with specifically defined audiences. And in doing so, they position their businesses to attract buyers and garner the interest they need to attain a fair offer price.


How do I navigate measured confidentiality for my business?

Your aim should be to safely generate interest among a very specific group of people. Here’s how to take this on.

First, you’ll need to study the dynamics of your relationships with members of your target audience and the perceptions they may hold. Then, look into the possible pitfalls you may face by oversharing.

Use this guide to help you make these assessments and form the right plan of action for marketing your sale:

Two coffee shop employees smile while holding a tablet device


Your employees


News of change can bring some uncertainty. Your employees might worry about working for an owner with a different style and vision for the business. They may also worry about the future of their jobs.

What could go wrong: Your employees could react unfavorably to the news. Performance issues could spring up as your employees process your decision to sell and decide on their next steps.


Further, some of your most valuable employees could resign and seek out roles that offer a greater sense of security. They might exit with knowledge of procedures and business functions that are necessary for a new owner’s success.


What else could go wrong: Your employees may share the news with people outside your business. This news could shake your customers’ confidence and cause them to find alternatives. And if the news reaches your competitors, you may spot them making moves to pursue your pool of customers before you have a buyer for your business.

What could go right: Your operations manager, business manager, or one of the more experienced members of your team may show an interest in buying your business. This could be a major win in several important ways. First, it could stabilize your employees’ feelings of uncertainty and stave off problems in productivity and performance. And second, it could relieve some of your own uncertainties about the future of your business.


What else could go right: Your employees could rally around you and help you see your decision through. They may reward your openness by helping you gather the documents, resources, and information you need to make your sale a success.




Verdict: Share your news with your employees if you believe they’ll be supportive and keep the news confidential.


Avoid telling a small number of your employees the news and not others. The employees you tell will almost certainly share the news with other members of your team, and you’ll lose control of the story.


A person holds a cup of coffee and a phone


Your customers


Your customers may not respond favorably to your news. Some could question the stability of your business and your reasoning for selling it. Others may wonder if their needs would be better served elsewhere, especially during the transition.

What could go wrong: Customers fear uncertainty. When you announce your decision to sell, many will look elsewhere to find a provider who will offer them a sense of stability and assurance that their needs will be met. You may lose some of your accounts, which could cause your sales numbers to fall drastically pre-sale.


Here’s why this matters: Sharp declines in your numbers may scare away the potential buyers of your business.



What could go right: Sometimes, customers reward transparency. They’ll support owners who are clear about their intentions, objectives, and reasoning. Your customers may continue to buy from you, and they may even try to connect you with people in adjacent industries who are interested in buying your business.


However, the odds of these outcomes are low. The more likely outcome is that they’ll start shifting away from your business and expose your news to your competitors.

Verdict: Don’t tell your customers unless you have a very compelling reason to do so. You can’t afford to lose their business during your exit. Further, you can’t afford the fallout that may occur once word gets out in your community.


A coffee shop manager stands confidently while an employee works in the background


Your competition


Your competitors can benefit tremendously from your plans to exit your business. Still, there could be some upside in sharing the news with other players in your market.

What could go wrong: Your competitors could try to acquire your customers and key employees during your transition period. This could undermine the odds of the new owner’s success and unravel the legacy of your business.


What could go right: One of your more successful competitors could show an interest in buying your business. Competing business owners may be eager to combine your firm’s competencies with their own to create a next-level corporation that’s capable of much more than either firm could achieve alone.
Verdict: Protect the confidentiality of your business. Don’t tell your competitors the news unless you think there is a real possibility of an acquisition. Even then, you must take steps to protect your business secrets until you’re given a letter of intent that confirms your competitor’s genuine interest in proceeding with integrity.


A vendor in a warehouse scans boxes


Your vendors


Your vendors will respond to the news of your business exit, too. They may show support and gratitude for your years of business together. They may also worry about the uncertainty your exit introduces for their own businesses.

What could go wrong: Your vendors may give you less favorable terms on future orders to compensate for their uncertainty. Those terms may extend well into the tenure of the new owner.


What could go right: One of your vendors could know someone in your shared market who is interested in buying your business. Or, they may be interested in buying your business themselves to expand their value chain and reach.
Verdict: Consider telling your most stable and trustworthy vendors and ask for leads on possible buyers. However, ask them to avoid sharing information about your sale with anyone without your express permission.


How can I ensure that interested buyers honor my requests for confidentiality?

Interested buyers will learn a great deal about your business before they decide to buy it. Most will learn its name and the reason you’re selling. Serious buyers will also gain access to your financials, practices, account lists, and more.

Practices, like the following, can help you to reduce your vulnerability:

  • To reduce the possibility of your customers, competitors, or others learning about your sale, consider using a descriptive phrase, generic terms, and a general location of your business on business sales sites to describe the kind of business that you’re offering and the vicinity that it serves.
  • To ensure that your offering stays confidential, require potential buyers to sign a legally binding non-disclosure agreement (NDA) before releasing any information. Law Depot offers a good option.
  • To avoid causing premature concern for your customers and employees, conduct tours with prospective buyers after hours.
  • To safeguard the details of your business, withhold the most intimate details of your business and put off requests to meet with your management team until you receive a letter of intent (LOI) from a prospective buyer that outlines their earnest desire to move forward with purchasing your business.
An attorney can help you draft an NDA and provide additional recommendations that can help you with confidentiality for your business.


Are you interested in connecting with an attorney? Click the button below to get started.


What’s next?

The process of selling your business is complex. We can help.

Log into your owner’s portal to learn more about finding the right buyers, the mistakes you must avoid, and the process you can follow to secure fair offers from buyers who can help your business succeed far into the future.

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