Mr. Handelsman

Finance & Investment

The Importance of Seller Confidentiality

By Mike Handelsman, Group General Manager, BizBuySell.com

When selling a business in tough economic times, some hotel owners believe that any and all means of communication about their business for sale will help spur interest from potential buyers. In reality, the opposite is often true. Selling a business is much different from selling a house in that being too forthcoming about the sale can have negative effects on the future prospects of the business. In order to keep your hotel or motel positioned to sell at the best price, you should keep the sale confidential. Here are some key points hotel sellers should consider to maintain confidentiality:

Know the Impact of Confidentiality on Employee, Partner and Vendor Relationships

After employees learn that the hotel is for sale, survival mode kicks in. They will likely question whether their job description will change or if their position will be eliminated altogether once new management takes over. To compensate for such uncertainty, employees may seek other job opportunities while the hotel is on the market, which could complicate the selling process. Human capital is a key business asset, especially when helping with a smooth transition once a new owner steps in, so losing your best employees before the sale may prove to be your ultimate barrier to selling. If employees find out about the sale before you'd like them to, it's imperative to reassure everyone on staff, from housekeeping to concierge to management, that they will play a key role come time for the transition. In addition to worrying about your human resources, you also need to think about what a break in confidentiality can do to your vendor and partner relationships. There is even a risk associated with having creditors know your business is for sale. Should they know their relationship with your hotel business may not be the same in the future, they could very easily limit the payment terms you currently have with them.

Consider the Competition

Business owners love to hear that a competitor is selling the business. If you happen to be their competition, being careless about keeping your sale under wraps could give them the opportunity to sway your customers in their direction. This could likewise happen with current employees. Customers and employees may be more disposed to buying from, and working for, a business that offers more security in their products and services. For example, if your hotel business currently has a rewards system in place, customers may feel that program is in jeopardy upon hearing about the sale. It could prompt customers to move their business to a competitive hotel, which essentially may offer the same thing, but where they know they'll be building points toward a secure and promised goal. Think Like a Buyer and Sell Accordingly

The level of risk associated with any business purchase is always on a buyer's mind, and if a seller's relationship with employees, vendors, partners and even customers is put into question, it can make buyers incredibly wary of proceeding with a purchase. Not feeling certain that the business will maintain its loyal customer base or well-trained, knowledgeable employees will likely result in lower offers - if any at all.

For this reason, it's important to think like a buyer when marketing your hotel for sale and consider what would likely sour a deal if you were on the other side of a transaction. There are two main approaches you can use when selling to be mindful of confidentiality without destroying critical selling points:

1. Use an Intermediary.

Also referred to as a business broker, an intermediary allows a business owner to market their hotel for sale without losing that coveted confidentiality. The intermediary shares the name and details of your business only after validating serious buyer inquiries, or in other words, acts as a buffer between the two parties involved. Oftentimes, a drafted confidentiality agreement also helps to ensure that the pre-screened buyer will not reveal details about the sale of your hotel business.

2. Sell on Your Own.

While this approach is more difficult for some, it's not impossible to still maintain your confidentiality when selling on your own. Business-for-sale marketplaces equip for-sale-by-owners with the tools necessary to facilitate a successful, non-compromised business sale transaction. While business listing strategy is a separate issue altogether, you do want to keep some basics in mind. Include a phone number -- a personal or alternate number rather than your direct business line -- in your listing to reassure potential buyers and maximize contacts. Also supply an e-mail address, but create a generic account specifically for responses from your listing. Mix images into your text without revealing the exterior of the building or obvious inside photos that clearly reveal the hotel's identity. Instead, use a photo that captures some of the key features of your business in a more subtle way, or use Google Images to find some generic images to represent what your hotel business is all about.

Ultimately, it's about finding the right balance of information. Too little information and few buyers will be interested in the listing; too much information and you might be running into some confidentiality issues that will also turn buyers away. You can almost always disclose the state and county of your business without disclosing the actual identity of your hotel. It is a good idea to avoid including your hotel's actual address, or even the street on which it is located. Instead, be non-specific and communicate benefits with information such as "near major highway," "near entertainment venues" or "close to a big vacation destination."

Mike Handelsman is Group General Manager for BizBuySell.com and BizQuest.com, the Internet's two largest and most heavily trafficked business-for-sale marketplaces. Both sites feature business valuation tools that draw from the largest databases of sales comparables for recently sold small businesses and include two of the industry's leading franchise directories. Since 1995, BizBuySell and BizQuest have offered tools that make it easy for business owners and brokers to sell a business and for potential buyers to find the perfect business. Together, BizBuySell and BizQuest list more than 75,000 businesses for sale at any time and have over 850,000 monthly visits. Mr. Handelsman can be contacted at 415-284-4390 or mhandelsman@BizBuySell.com Extended Bio...

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