“Loose lips sink ships.” It’s a familiar phrase to Americans, originally written by the War Advertising Council during World War II as “Loose lips might sink ships.” The British also used variations of the phrase that encouraged citizens and military personnel to avoid careless talk that might serve the enemy.
The phrase is still used today to caution against thoughtless chatter in general.
When selling a company, it is vitally important that confidentiality is maintained throughout the business transfer process. A breach of confidentiality may not only kill the deal, it can cause further repercussions to the seller as employees and customers may leave, creditors may begin to scrutinize more intently and competitors may capitalize on the perceived opportunity.
If a business owner is unable to disclose information, how is he supposed to sell his company?
Business brokers are professionals in this arena and have the experience and tools in place to manage the business transfer process discreetly, helping sellers maintain the utmost confidentiality until the transaction has been completed. This is accomplished by:
- Marketing effectively
- Qualifying buyers
- Using documents that require confidentiality
- Managing the information flow
A business broker should prepare a customized marketing approach for each company he lists for sale. This includes describing the business in a generic fashion — one that will appeal to prospective buyers without jeopardizing the seller’s identity.
Approximately 90% of prospects who initially reply to advertisements are usually not a fit at all, generally because they lack the necessary experience or cash investment for the transaction. There are also a lot of “lookers” or “tire kickers” who can easily drain a seller’s time and tax his emotional energy. Business brokers have the skills to help qualify buyers immediately before the seller is ever involved.
Business brokers use confidentiality agreements, with wording prospective buyers must agree to, in writing, before additional information is released.
Business brokers also manage the flow of information, holding the most sensitive records secure until a formal offer to purchase (with escrow deposit) has been accepted by the seller.
The business transfer process is somewhat unique in that the details of the entity being sold are not shared initially, but rather peeled away as the buyer becomes more interested and continues to offer proof of his sincerity and qualifications.