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Business-sales confidentiality: knowing what to disclose and when

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If you're looking to sell your business, then you'll need to think carefully about how much information you disclose to potential buyers and other interested parties.

Although you can't expect to sell the business without making detailed information available, there are risks associated with making the wrong judgement in this area.

The danger here is that you could even end up reducing the final sale price of the business. In order to understand what's involved, it's worthwhile considering the impact of divulging information. You should think carefully about how other people are likely to react.


Your employees may feel unsettled by the news that the business is to be sold. It's likely that they will have concerns relating to job security, which may even cause them to seek other sources of employment.

The risk here is that their productivity levels may drop and that the entire enterprise could become less efficient. This is unlikely to look good to a potential buyer. Indeed, buyers may be expecting to retain skilled, reliable members of staff. If such employees depart the business, prior to the transaction being completed, then it's likely that you'll be reducing the value of the business and the price that you will get paid.


You may have spent a considerable period of time building up strong working relationships with your suppliers. You may even feel that such relationships add value to your business and allow you to compete more effectively.

Once suppliers start to find out that you are intending to sell, they may reach the conclusion that this is due to the fact that you are facing financial difficulties. As a result, there's a possibility here that you will find it much harder to get credit. If you are forced to pay cash on delivery, for example, then this can clearly have a negative impact on your cash flow situation.


Your customers may also feel a sense of unease, if they learn about your plans. Their concerns are likely to surround the thought that the business may not be operating much longer, meaning that they may no longer have access to the support that they desire.

When faced with such a situation, customers may decide to place orders with your competitors. Such a negative impact on the financial situation of your own business is likely to cause prospective buyers to worry and to negotiate a lower purchasing price.

Financial institutions

Banks and other financial institutions are often wary of lending to small businesses. Here in the US, they understand that small businesses have a high failure rate and tend to represent a considerable level of risk. Any uncertainty that causes such risk levels to rise can cause problems.

You may find, as a result, that you may struggle to get access to finance. Your overdraft facility may even be restricted, which could create serious problems, restricting your business activity.


It's likely that your competitors will be delighted, when they find out about your intentions to sell. In fact, there's a strong chance that they will make your intentions known to as many customers and suppliers as they possibly can.

That's because they understand that there is the opportunity here to benefit from the uncertainty. They may be able to gain more customers, or get access to products from suppliers who previously supplied to your own business on an exclusive basis.

Once word gets out, there's clearly an immediate opportunity for your business to be damaged. If your sales start to decrease, then you have to expect that potential buyers will see the enterprise as having less value.


It is possible, however, to reveal details of your intentions, without having the negative impacts discussed above. You can have a Confidentiality Agreement drawn up by a lawyer, which ensures that information that is passed on to prospective buyers cannot be released to your employees, competitors, suppliers, banks, or other interested parties.

Such an agreement allows you to release the necessary information, with the confidence that it will only be used for the intended purposes. It's important that you do ask a lawyer to create the document and that you don't look to sell your business without doing so.

As can be seen from the description above, you need to ensure that details of your intentions are not shared too widely.

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