The Truth About Confidentiality When Selling your Business


Keeping it quiet about the upcoming sale of your business is mandatory and really one of the most important aspects of selling your bsiness. While it may be your preference not to tell anyone anything confidently, the reality is it will be imperative for you to reveal certain confidential aspects of your business.  You can be assured that if you properly prepare for the process you will protect your business information and properly sell your business.

When the news spreads that the business is for sale it can set-off negative reactions among competitors, customers, vendors and employees. Each reaction could easily slow your growth and decrease your company’s value, as well as kill the idea of selling the business! Letting the world know your business is for sale without letting business colleagues know can be a tricky task. The good news is that in the 21 century, there are a number of easy, but strategic, steps that can insure that the proper level of confidentiality is maintained throughout the sale process.

In this article I want to focus on three primary strategies that are essential when selling a business.

Non-Disclosure Agreements

A Non-Disclosure Agreement, or NDA, is a document where a prospective buyer promises not to share any confidential details regarding your business. While this seems like a very basic step, it is scary how many business owners, and even business brokers, fail to have prospective buyers sign an NDA.

At Sigma, we require every single buyer to sign our NDA prior to looking at ANY information on a business. This legal and binding document guarantees confidentiality and that a buyer be held liable if any business information is shared with a third party. I would also suggest that every person you speak to during this process sign an NDA.  This includes business brokers, attorneys CPA’s etc.  These professionals should know to keep the sale confidential, but it’s better to be overly protective of your information. Think about how often a CPA isn’t thinking about confidentially and off handedly mentions to a competitor that you are thinking about selling? It happens way too much.


When I started in this industry we had prospective business buyers that would fax their signed NDA form to us. Throughout this time I received NDA’s from Mickey Mouse, Donald Trump and Joe Blow.  After speaking to these people about their bogus names on their NDA I was told that many business owners and business brokers never paid any attention and would fax back all kinds of confidential information about the business. This was SHOCKING to me and caused us to look further into technology in other industries.

In this day and age it is now easy to figure out who someone is through using Google, Linkedin and a variety of other databases. This is why, here at Sigma, we have the technology that verifies every potential buyer and makes sure that they are who they say. This, in turn, helps us make sure that they are not a competitor, customer, vendor or employee. It doesn’t matter if you use the technology we have or search engines like Google, use the technology that is at your disposal before sharing your information.

Technology Working Against You

Revealing too much in your communications with your buyers can leave you overexposed. I will also mention that if your business is listed for sale online, make sure that you (or

your business broker) don’t copy and paste verbiage from your website. At that point, all a buyer has to do is copy and paste the ad into Google and guess what?  Your website will pop up without them ever having to give their name or sign an NDA. As helpful as technology can be, it can sometimes work against you.  Don’t be lazy when it comes to the sale of your business. Make sure that you or your business broker writes 100% original content.

Processes or Hurdles

Serious buyers understand confidentially and are willing to jump through logical hoops to maintain it. Once you find a really good and qualified buyer that you’re excited about it becomes harder to maintain proper confidentiality, but this is not the time to let your guard down. Here are a few tips that will help you insure that you are not revealing too much (at least too soon):

Deliver Information in Multiple Phases

Information should be given over time as the buyers prove that they are serious and qualified. Have they been prequalified with a bank?  Have they been forth coming with their back ground and reason for their interest in your business?  Deliver information in multiple phases. For example, even with a signed confidentiality agreement, you shouldn’t share proprietary processes, trade secrets, client lists or financial details until the business buyer has demonstrated their purchasing ability and made an offer (Some proprietary processes are only disclosed after the sale during training or in legal disclaimers).

Don’t Release the Address or Business Name Too Early

It is important to make sure that the buyer is not a tire kicker and is truly qualified.  I recently received a business for sale memorandum from a local business broker that had the name of the business, the address and copy of the tax return with the business owners Social Security number still on the form!  I’m not sure why this business broker was acting so reckless with the businesses information, but this is a big problem and could harm ongoing business operations, as well as the value of your business.

Redacted Financials

Provide only redacted financials until you have an offer or letter of intent. While it is important to share details about the businesses financial track record it is not necessary to provide the name of the business.

Customer concentration can also be a meaningful concern for a business buyer. It is possible to create a report with “sale by customer” and redact the customer’s name, just replace their name with a number or other code. This allows the buyer to get the information they need without giving the buyer your actual customers. They do not need the customer’s actual names until later in the process.

Only Involve Key Employees

Almost every buyer wants to meet with all of the employees to make sure that they’re not going to leave after they purchase the business. Sometimes these meetings are required in order to close the transactions. When it is necessary, I highly recommend that the meetings only involve the key employees that are vital to the ongoing operation of the business. While it isn’t my preference for business owners to ever involve their employee’s, sometimes it is absolutely necessary.

Most business buyers are extremely concerned that key employees will leave once they know that the business is for sale and they will have over paid for the business. Therefore, it is imperative to develop well thought out strategies for these concerns. Your strategy should include limiting access to employees and possibly avoid this type of meeting entirely if possible.  If avoiding the meeting isn’t possible, then make that meeting as late in the process as possible.

Prior to a prospective buyer meeting with any employee you should feel good that the transaction is going to close. When our clients have key employees meet the buyer we make sure that the only reason that the deal would not close is if the meeting with the employee doesn’t go well. These meetings are often times a requirement from buyers, so limit the access, be present for the meeting and make it as late in the process as possible.

It’s important to keep in mind that confidentiality is the key to selling your business.  When it is violated your business can be damaged and your value diminished.  You will be required to reveal confidential aspects of your business during the sales process. Rest assured that if you properly prepare for the process you will protect confidentiality and properly transfer your business. When confidentiality is maintained it helps a buyer purchase a business that has secure employees and revenue going forward.

Scot Cockroft Business Broker
Hi, I’m Scot Cockroft.

When I founded Sigma Mergers and Acquisitions back in 2003, I had sold my business the year prior.

Now, that can sound good, but let me tell you, back in 2003, it was not easy to sell a business. Not that I’m saying in modern day times it’s easy to sell a business, but back then I interviewed broker after broker after broker, and no one was interested in actually seeing the value that my business brought to the table.


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Sigma is a the leading business broker in with Corporate offices in Dallas/Fort Worth with roots from 1984. Over 600 businesses sold in Dallas, Fort Worth, Texas, Oklahoma and across the South. Sigma provides full business brokerage services with NO upfront fees. We provide Market approach business valuations for business sales. Sigma is passionate about helping business owners achieve their goal of financial security. Contact us today for a free no obligation business valuation. We are here to help you achieve your goals.

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