The Importance of Seller Confidentiality

By Mike Handelsman Group General Manager, | November 30, 1999

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.

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