Protecting Your Interests When Selling Your Business: The Importance Of A Strong NDA
It is incredibly important to have any parties interested in buying a business sign a confidentiality agreement / NDA (Non-Disclosure Agreement) before releasing any information to them about a business for sale. This document is put in place in order to protect the seller’s interest and their business’s future.
A non-disclosure agreement states that a potential buyer will promise not to share any information about the business, including its name or the fact that it is even for sale, with anyone.
NDA’s can be as short as one page and should outline which information is confidential and who from the buyer’s team of professionals may be privy to any information pertaining to the business. They must also include that the prospective buyer understands that they may/will be financially liable to the seller for violating the agreement in any way.
Before giving a potential buyer a non-disclosure agreement, it is critical to obtain a buyer’s profile from them to ensure that they are in fact qualified to purchase the business.
The seller’s broker will want to have the buyer prospect’s name, contact information, financial statement that demonstrates their ability to pay for the business/obtain business purchase financing if necessary, interested business industries and geographical areas in which they want to conduct business, and a summary of their business experience.
Without the proper information specified by the broker, it would be nearly impossible to pre-qualify the buyer or share any details of the business with them.
Additionally, if they ignore the requests for documentation or fail to disclose and provide the necessary information about themselves, one can probably guess that their interest in purchasing the business is insincere.
Non-disclosure agreements and buyer profiles simply act as a safety net to protect the confidentiality of a business’s sale, as well as the interests of the business owner/seller, and are used to ensure that no unqualified parties will have access to any details regarding the potential sale of a business.