Here is part 4 of our 10 do's and don'ts of business selling. We gained these insights from hard-won experience and observing what can happen in the business selling market!
4. DON’T – Fail to disclose critical information material to the business performance
Do – Be forthcoming with potential purchasers
In tip Number 1 we talked about credible and robust information and establishing a purchaser’s confidence.
JPAbusiness is known for providing very detailed and robust information memorandums (IMs) on businesses we’re selling.
We do that for a number of reasons:
- We feel the more information one can provide upfront on an opportunity, albeit under confidentiality requirements, the better placed a purchaser is to appreciate the value of a business.
- Quality, detailed information allows the seller and buyer to ‘prequalify’ each other.
If, in this early stage, the purchaser can see the business ‘ticks all their boxes’ you have a better chance of the initial enquiry progressing to a successful sale.
If, however, it’s clear from the outset the business doesn’t offer the particular opportunity the buyer is seeking, it will save you both wasting time in the long run.
- If a purchaser, through a due diligence process, gets a feeling information is being held back or situations are being ‘airbrushed’ to cover up potential issues, ultimately those things will be found out.
They may be found out before a contract is signed or after, but either way it will lead to a difficult circumstance.
In selling your business you need to put it in its best light, but you also need to ensure the information provided is accurate and not misleading.
Be forthcoming … but also protect ‘sensitive information’
I’d like to qualify my advice on being ‘forthcoming’.
While it’s important to be forthcoming with purchasers on information about the business, it’s also important to have a good advisor helping you manage the provision of commercial and sensitive information through the sales process.
It’s not unreasonable or unusual to want to hold back some very commercially sensitive information on your business until you have a binding position with a purchaser.
For instance, sometimes certain customer contracts or pricing details will be held back until the purchaser has signed a contract, and then that information will be a condition of completion.
If you would like advice or support to sell your business, contact the experienced team at JPAbusiness for a confidential, obligation-free discussion.
From the JPAbusiness archives, refreshed and checked for accuracy November 2016.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.