Business Insights & Resources

One of the biggest mistakes a business owner can make is providing confidential information too early in the sale process.

I’ve seen situations where sellers are eager to discuss revenue, profits, customer lists, suppliers, and operations before they truly know who they’re speaking with. The reality is that not everyone requesting information is a legitimate buyer.

Releasing an overview of the business with a snapshot of the revenue and profits is fine but releasing the business name or location must wait because:

Some are competitors.

Some are curious industry participants.

Some simply do not have the financial capacity to complete a transaction.

Before disclosing your business name consider the following verification steps.

Step 1: Obtain a Signed Confidentiality Agreement

A confidentiality agreement (NDA) should be the minimum requirement before any meaningful information is shared. The agreement should prohibit the recipient from disclosing information to third parties (except for Representing Brokers, Accountants, Lawyers and Lenders), contacting employees, suppliers, customers, or using confidential information for competitive purposes.

An NDA alone, however, is not enough.  Anyone can sign a document.

Step 2: Verify Identity

Know who you are dealing with.

Request the buyer’s:

• Full legal name
• Phone number
• Email address
• Company name (if applicable)
• LinkedIn profile or business website

If someone is unwilling to identify themselves, that should raise concerns immediately.  Serious buyers understand the importance of transparency.

Step 3: Confirm Financial Capacity

One of the most common reasons transactions fail is because the buyer never had the financial ability to purchase the business.

Before disclosing detailed financial information, consider requesting:

• Proof of funds
• Bank letter confirming available capital
• Investment account statement (with account numbers redacted)
• Lender pre-qualification letter
• Evidence of equity available for a business acquisition

A buyer does not need to disclose their entire financial picture, but they should be able to demonstrate that they have the resources necessary to complete the purchase.

This step will also allow you to see how much Vendor Financing they will most likely need based on their financial capabilities.

Step 4: Understand Their Motivation

Ask simple questions.

Why are they interested in the business?  Do they have industry experience?  Have they owned a business before?  Are they looking for an owner-operator opportunity or an investment?  The answers often reveal whether the inquiry is genuine or simply exploratory.

Step 5: Release Information in Stages

Not all information should be provided at once.

A common approach is:

Stage 1:
• Anonymous business summary
• Industry
• General location
• Snapshot of Revenue, COG and Expenses
• Purchase price 

Stage 2 – After confirmation of financial capacity has been provided:
• Business Name & Detailed financial statements
• Operational information
• Lease information
• Employee overview

Stage 3 – After an LOI has been presented:
• Customer details (redacted customer names)
• Supplier details (redacted supplier names)
• Site visits

Information should become more detailed as buyer qualification increases.

Step 6: Protect Your Employees and Customers

Premature disclosure can create uncertainty among employees, suppliers, landlords, and customers.  This is why many sellers choose to keep the business name confidential until a buyer has been properly vetted and demonstrated both financial capability and serious intent.

Once confidentiality is lost, it cannot be recovered.