How to Sell Your Business, page 14

Confidentiality, continued

Company and product literature, discussed earlier in this article, can be excellent material for promoting a business sale (they have the advantage that they don’t explicitly say that the business is for sale).

Business brokers and other intermediaries can keep your identity secret during initial prospecting for buyers more easily than you can (see Working with Intermediaries later in this article). You can help to keep your company identity a secret at early stages by getting a separate phone line, possibly at home, to deal with inquiries.

When all is said and done, you will have to make an assessment both of how much you stand to lose if it is widely known that your business is for sale, and how much you might gain by widely promoting your business. If there are only one or two potential buyers for your business, then there is no reason that anyone beyond these buyers should know that it is for sale. If the success of your business is dependent on one or two “tricks,” and it would be devastating for competitors to learn these tricks, you must be very careful.

Broader exposure may lead to more potential purchasers and a higher purchase price. But the best advice, even if you do decide to go for broad exposure, is to be careful about what you disclose. Wait to see clear indications of seriousness from a buyer before revealing the crown jewels.

Idenitifying Potential Strategic Purchasers

If your company does not have a convincing case for a reliable future earnings stream, then it must be sold to a strategic buyer. Even if it has a good earnings story, a strategic buyer may pay more. Therefore, it is very important to identify potential strategic buyers, most of whom you can probably contact yourself. (This contrasts with financial buyers, whom you will generally need an intermediary to contact in any breadth.)

Strategic buyers come in three main flavors:

• Customers

• Suppliers

• Competitors

In addition, another class of strategic buyer are those who can extend your offering, thereby making it more profitable. One way this could happen is with new distribution channels (for example, enabling the acquiring company to distribute your product internationally).

Another scenario is product synergy. Your product or service, plus the acquiring company’s product or service, make a more valuable new product.

Continued next page

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