The Importance of Confidentiality When Selling your Business

Selling a business isn’t exactly a cake walk. There are a lot of factors that need to be considered, such as the price being offered for the business, what the potential buyer plans to do with it going forward, what will happen to the employees once the business is sold, etc.

Those are all legitimate concerns but often they can blind business owners from one that’s perhaps the most important of them all: Confidentiality. It’s imperative that business owners recognize the importance of maintaining confidentiality throughout the sale process.

Now that might sound like a bit of a dilemma. How are you supposed to sell your business when you can’t even tell people what it is or how well it’s doing? You might also feel that maintaining confidentiality at this stage could actually be counterproductive.

That couldn’t be further from the truth. Let’s first discuss the reasons why maintaining confidentiality when selling your business is important and how you can actually go about it.

Why confidentiality is important when selling your business

A deal is not done until all the t’s are crossed and the i’s dotted. You wouldn’t want to reveal any information that could potentially hurt the business should a deal fall apart at any stage. Even when you’re in the process of vetting buyers and taking offers, you have to ensure continuity for the business.

A potential sale shouldn’t impact the day-to-day operations. Employee morale must remain high, customers must be catered to as they always have been and the business should engage with all of its vendors and suppliers as it always has. Regardless of how close you might be to sealing the deal, on the s

urface it should appear business as usual.

Always ensure that you are in control of the narrative. Even rumors about the potential sale of your business can have devastating consequences, such as:

  • Nervousness among employees about their future after the sale might compel them to look for opportunities elsewhere and consequently cause a resource drain for the business
  • Competitors can use rumors about a sale as an advantage to develop strategies for stealing your customers by sowing doubts about the future of your business
  • Vendors and suppliers may no longer be interested to continue doing business with you if they feel that the sale would bring an element of unpredictability to the relationship
  • If you have built a relationship of trust with customers, they may not be willing to stick with the business after it’s sold to someone they don’t know or have a relationship of trust with

How to maintain confidentiality when selling your business

One of the best and easiest ways to go about this is to work with an intermediary. These service providers help people sell their businesses. An intermediary can handle everything from assessing your business to advertising it for sale, screening buyers, conducting due diligence and more.

Your intermediary will generally list your business for sale with a blind ad. The ad only describes the business opportunity to interested buyers without revealing any information that could expose the identity of your business. It will provide general information about the industry, revenue, cash flow, location, etc.

Good intermediaries should have a wide array of tools to identify and connect with potential buyers, so that their process can be much more comprehensive than you can execute on your own.

All interested buyers will contact the intermediary for more information. It then starts the process of qualifying leads to ensure that only serious buyers are provided more detailed information. That’s usually also done without sharing any information that could break confidentiality.

Before the intermediary shares information that can identify the business, they’ll first have the potential buyer sign an iron clad non-disclosure agreement. This is done to limit the risk of the buyer revealing confidential information to others or even disclosing that the business is being sold. If they do, you’ll have the right to sue them for breaching the non- disclosure agreement.

To many, it might appear tempting to try and sell their business themselves. Those business owners often don’t comprehend what consequences the lack of confidentiality can create.

By working with an intermediary, you can have the peace of mind that the entire process is being handled professionally with the utmost regard for confidentiality. So even if the deal falls through at any point, the risk of it negatively impacting the health of the business is greatly minimized.

Prior to purchasing IBEX, Chuck Harvey spent 35 years as CEO, CFO and consultant to the Fortune 500, Middle Market, Mainstreet and in the Start-up community, including spending time at PepsiCo & Price Waterhouse Coopers. During that time, Chuck oversaw three dozen buy-side / sell-side transactions on three continents, including a $35M sale of a Texas digital photography pioneer to a $1 Billion Japanese conglomerate.

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