Selling in Stealth Mode: How to Market Your Business Without Alerting Customers, Vendors, or Employees
Most business owners understand that confidentiality matters during a sale. What many don't appreciate is how fragile it is once the business goes to market. A single conversation, an unusual document request, or a change in behavior can unsettle employees, worry customers, and set off speculation among vendors and competitors.
That's an ExitReadiness® issue. Once fear and uncertainty set in, value can start to erode long before a transaction closes. Key employees may leave, customers may look elsewhere, and competitors may take advantage. Protecting confidentiality protects the relationships and stability that make the business valuable in the first place, and it preserves your leverage throughout the process.
In this episode, Pat Ennis and Walter Deyhle talk with Greg Kovsky, President and CEO of International Business Associates (IBA), the Pacific Northwest's oldest and largest business brokerage firm. Drawing on more than 30 years and over 300 completed transactions, Greg explains how to market a business without alerting customers, vendors, or employees, how to screen buyers, where leaks really come from, and when to bring your team into the loop.
Key Takeaways
Tell employees once you know the buyer. A vague announcement creates a "black cloud" of uncertainty, and good people may leave for a competitor. Once a buyer is chosen, you can introduce someone specific and explain why they were selected.
Employees are part of what's being bought. Buyers often make the deal contingent on keeping key people. Losing them at the time of sale can change the business itself, like a famous restaurant losing its head chef.
Premature disclosure creates leverage against you. Employees who know the sale depends on them may ask for raises, and announcing a sale before you've chosen a path can raise false hopes of an inside purchase.
Build loyalty before you sell. A culture where people work for the brand, a strong middle management team, and an ownership mindset all make a transition smoother. Minority shares or stay bonuses held in escrow can keep key people through the handover.
Vet buyers for intent and ability to pay. Buyers who can't finance the deal shouldn't learn the business is for sale at all. Be especially careful with unsolicited offers from competitors, who may be fishing for your customer list and "secret sauce."
Leaks often come from unexpected places. Major customers, landlords, and the people around them can spread the news with no malicious intent. The more parties involved, the higher the risk.
Disclose fully, so due diligence is verification, not discovery. Share issues like customer concentration up front. A buyer who knew the facts before closing can't hold you responsible later, and surprises in diligence can kill a deal.
Selling is a second job. Owners must keep running the business while responding to a steady stream of buyer requests. Plan for the time and energy it takes.
Where to Start: Greg's Three Steps for Selling in Stealth Mode
Get the legal documents in place. Use enforceable non-disclosure and non-solicitation agreements with potential buyers, and appropriate agreements with employees. Non-compete enforceability varies by state, so work with good legal counsel.
Vet your buyers. Confirm they have both the intent and the financial capability to complete the transaction before sharing sensitive details.
Be strategic about timing. Share information with each party only when it's needed. Your strategy will depend on your situation; a sale to a family member who has worked in the business for years needs far less secrecy than a sale to an outside buyer.
About Greg Kovsky
Greg Kovsky is President and CEO of International Business Associates (IBA), the Pacific Northwest's oldest and largest business brokerage firm, established in 1975. With more than 30 years of experience as an M&A intermediary, he has facilitated over 300 transactions involving privately held companies and family businesses across multiple industries, typically ranging from $1 million to $30 million in enterprise value. He is also a published author, seminar speaker, and advocate for entrepreneurship.
Connect with Greg: LinkedIn · ibainc.com
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Disclaimer: The information presented in this podcast is provided for educational purposes only. Neither the presenters nor ENNIS Legacy Partners are engaged to render legal, accounting, tax, or other professional services. Consult a qualified professional regarding your specific circumstances. ENNIS Legacy Partners assumes no legal liability for any loss related to information contained in this presentation.
Full Episode Transcript
This transcript was generated automatically and lightly edited for readability. It may contain minor errors.
Hey there, this is Pat Ennis of ENNIS Legacy Partners. Welcome to the ExitReadiness® PODCAST. I'm here with co-host Walter Deyhle. Our mission is to provide you, the business owner, with subject matter expertise on topics pertaining to building sellable business value and planning your eventual exit from the business. We want to help you build a business that is transferable and then exit successfully on your own terms and conditions.
Most business owners understand the importance of confidentiality during a sale process. What many do not fully appreciate or understand is just how fragile that confidentiality can be once the business is actually taken to market. A single conversation, an unusual document request, or a shift in behavior can create concern among stakeholders like employees, uncertainty among customers, and speculation among vendors or competitors. And once fear or uncertainty enters the picture, value can begin to erode long before a transaction ever closes. So how do you explore a potential sale without unnecessarily disrupting the very business you're trying to protect?
Well, that's the focus of today's conversation: Selling in Stealth Mode: How to Market Your Business Without Alerting Customers, Vendors, or Employees. And joining us today is our guest, Greg Kovsky. Greg is the President and CEO of International Business Associates, IBA, which is the Pacific Northwest's oldest and largest business brokerage firm, established in 1975. With over 30 years of experience as an M&A transaction intermediary, Greg has personally facilitated over 300 transactions involving privately held companies and family businesses across multiple states and multiple industries, with transactions typically ranging somewhere between $1 million and $30 million in enterprise value. He's a published author, he's a seminar speaker, he's an advocate for entrepreneurship, and he operates on a unique personal work-life balance philosophy of working 45 weeks per year while maintaining a family-first approach to business.
So, Greg, welcome to the podcast. Thanks for getting up early out there on the West Coast to join us today. It's an honor to be here, Pat. Thank you. It's a pleasure to join you and Walter.
Yeah, Greg, I'm going to start us off. As Pat said, thanks for joining us. Let me ask you about a situation we're dealing with right now. We have a client with a personal service business, very niche, and the owner is 100% central to the business. She has about a dozen employees, all professional people, and she's in her 70s.
She's very concerned about them knowing that she's thinking of transitioning the business in some way. We haven't determined the best course yet, whether it's a third party or some type of inside transfer. But part of me thinks, isn't it good in a lot of situations for your team to know that you're thinking about the future? Otherwise, aren't they thinking, geez, what's going to happen if she dies or something? So isn't there a trade-off between keeping it confidential and close to the vest versus inviting your team in, and how do you deal with those situations? Are there variables that help you determine how to handle it?
Certainly. You're unpacking a significant issue in the sale of businesses, and it's because there is no slavery in America. To the buyer, the employees are a significant asset, just like they were to the seller. So you want to transition them smoothly from one tenure of ownership to the other, but you want to mitigate the fear, because individuals can make decisions in their own self-interest as employees. What we try to do as an M&A firm is diminish the black cloud on the horizon, because it can take six months to two years to sell a business. If it gets into the public domain with the employees that a sale is contemplated, they could leave and join a competitor who's been recruiting them for years.
They've been loyal to the existing owner. But if the owner is leaving, why not make a decision in their self-interest? It's no different than a professional athlete who becomes a free agent and hops teams; you go where it's in your best interest. So we want to control the narrative and introduce the sale to the employees strategically, at a point where we know the buyer, because then it's not an ambiguous black cloud of uncertainty. It's someone we can sell to the employees, talking about their experience, their background, their vision for the future, and how this party was selected from numerous choices in the best interest of the employees, the customers, and the vendors.
So there is a point where it needs to be disclosed, and often a buyer will have contingencies related to the retention of key employees. If you have a restaurant that's famous for Italian food and you lose the head chef and his support chef at the time of sale, I don't care how nice the wine they pour is or the ambiance. If they can't deliver the same quality product, it's not the same business. Employees do matter. They are the human capital in a business sale.
So you want to go through that process strategically, to ensure they're listened to, that the business is protected up to the sale, and that the buyer has the best opportunity for success post-sale. Yeah, I think those are really interesting points, especially the word "strategically." As you were speaking, I was thinking, if you go to your employee group and say, "Hey, I'm going to retire in five years. We haven't figured out if we're going to do an insider sale or a sale to an outsider," you're automatically setting yourself up for problems. People will start thinking, "Oh, I'm going to have an opportunity to own the company." Then you come back and say, "Well, we're going the third-party route," and now you've upset a bunch of people.
So I understand what you're saying. You don't want to let them in until you have a road map that they can see. Right. Exactly. And there's also a leverage point for employees that can jeopardize a sale, in that they can ask for a raise if they know the sale is contingent on their retention. I'm watching the NBA playoffs right now, and if one key player on a team is a free agent and chooses to go somewhere else after the season, it's not going to be the same team next year.
Yeah, good point. So, Greg, in light of what you've said so far, what are some of the common mistakes you see owners making in this very critical and important communication strategy? I think it's not creating a corporate culture where people want to remain with the company, where they're playing for the brand rather than for an individual, by working on the business, as you've heard, not in the business. It also enhances the value if you have a good middle management level, where you could go away for a two- or three-week vacation and the business would do just fine. And you hope to develop an ownership mentality with your employees.
We frequently see golden handcuff situations where owners have proactively given employees a minority share in the business, so they benefit at the time of sale and have a vested interest in getting the most value in a smooth transaction. And many times I've seen owners leave dollars in escrow for employees and say, "I need your help on this transition of ownership. I value your contribution over the years, and if you are here in six months to a year, I've left this amount of money in escrow for you. If you help me with the transition and are still here, it gets disbursed to you. If you're not, it comes back to me as the owner."
It's your judgment whether you want to do it. But my experience has been that the fear factor is highest on the date of the ownership transfer. Three months later, most people don't want change. They're happy where they are, that anxiety diminishes, and they say, "Actually, this new owner is better, because they're listening to me, where I wasn't necessarily getting my ideas heard by the old owner." Yeah. We call those stay bonuses, and listeners, if you need more information on stay bonuses, you can contact us at ennislp.com and we can provide information.
Greg, on this confidentiality piece, how often do leaks actually happen, and where do they usually originate? Leaks do happen. It's a fire drill that we do not like at our firm when it happens. I think one of the advantages of having a third-party M&A firm is that they are the storefront for the transaction. When the business is being advertised for sale, it's not necessarily known where it is.
For example, Walter is in North Carolina. I sold a business in the Triangle in North Carolina, and with a firm based in the Northwest, you would never have guessed that's where this niche client was located. So the firm serves as a storefront. It obtains non-disclosure agreements from potential buyers, and those need to be enforceable if someone has loose lips. One of the pieces that I think is underperformed by owners, and in our industry, is vetting the buyer on their intent and also on their financial capability, so that they're not just dreaming of this acquisition.
They need to have the chips to sit at the table and play the game. We get great inquiries from buyers with relevant experience who could probably run the business fine, but they don't have the financial capability to buy it. That party shouldn't ever learn that the business is for sale. So you need a really strong up-front process. And Pat, you're correct: the more parties brought into the loop, the more people learn that a business is for sale.
I'm based in Seattle, and we sell aerospace companies, and there's really one company in America you want to sell aerospace components to: Boeing. Boeing may use a transition of ownership as an opportunity to shop a component contract, and it can get out into the public domain. Another risk is the landlord, when they become aware that a business is for sale. We're dealing with REITs and private-equity-owned real estate, and they really don't seem to care a whole lot about the impact on the business, because the default is they keep their present tenant, which they're fine with. So they can be problematic in keeping information in close confidence, because they may just pass the information to an administrative person.
And inevitably that administrative person's brother-in-law works at the company, and they mention to him at a barbecue, "Hey, do you know your company's up for sale?" And that's how things can get into the public domain with no malicious intent. Hey, Greg, based on what you're saying, it sounds like it would be really risky if you get an unsolicited offer and pursue it. You haven't really thought about selling, but you'd like to know what somebody might think the company is worth. Now you run the risk of that leaking, and everyone thinks you're trying to sell your company, right? So you've got to be really careful with those.
You do, with an unsolicited offer. Many times they come from a competitor in your space who's looking to grow by acquisition, and this is again one of our vetting pieces. Many of them are trying to gain field knowledge, and they may not have the intent to buy, but they may want to learn your secret sauce. They will sign a non-disclosure agreement, which mitigates some of the issues, but it's their industry and your industry, and you already know the same customers and the same vendors. All they can't say is that you're for sale, but they can use the knowledge.
They're looking at customer concentration, which every buyer should look at. Then they notice that your biggest customer is a customer they also do business with, but they're only getting a small percentage of what that customer orders. So they push the wining and dining on that customer and say, "Hey, can I take your sales team away for a golf holiday?" And things cascade. You've got to play three-dimensional chess in selling a business, because it's not a linear situation.
Greg, what about leaks in due diligence? Those can happen too. Due diligence is encouraged. You want a buyer purchasing in an environment of full disclosure, because that mitigates liability for the seller. If the buyer knows a fact before they purchase the business, like customer concentration, then if they lose that customer, they can't hold you responsible, because they made the acquisition knowing that customer is 30% of sales.
But due diligence can be very invasive. Maybe they want to interview key employees, key customers, and key vendors as part of that process. You can be a little strategic, but at some point the cat's going to get out of the bag, and you want to be far enough down the trail that the buyer is committed. And again, if you've emphasized an environment of full disclosure, due diligence should be a verification process, not a discovery process. I'll stay with customer concentration because it's easy: if you were up front and said, "Boeing is my biggest customer. I manufacture aerospace components. If I lost Boeing, it would be very detrimental for the business, though it may not kill it," then when they actually look and see Boeing was your top customer and did X amount of revenue in each of the last three years, that shouldn't be a deal-killing element.
Whereas if you just shared top-line revenue, "We did $8 million a year, we're in the aerospace industry, we sell to the space component market, which is growing and thriving," they may be all positive, but they didn't know about the customer concentration element. Yeah, that makes sense. Hey Greg, I'll share our experience: business owners seem to underestimate the amount of time, energy, and emotion that goes into this process for them. They think their business is just going to keep running while they're in the middle of it. That can be really difficult, right?
It's very difficult. Our sellers are generally taking on another part-time to full-time job facilitating the sale of the business, and they still have to run the company. Right now we're dealing with people laid off in the tech industry who are buying companies. They have all the time in the world to work on the acquisition, and they send a stream of requests, while our sellers don't have the same availability. Yeah.
So, Greg, given all these ways leaks can happen, is the general rule for communication strategy to get started well in advance of a potential LOI and due diligence? It seems like it would be, because of the potential for leaks and all the uncertainty that results, and then the value of the business goes in the wrong direction. I would say that, coupled with having good legal counsel and making sure you have non-disclosure and non-solicitation agreements in place in the process, just to set expectations with the buyer and the appropriate parties. Okay, good. All right.
Well, this has been terrific, very helpful information. We like to give listeners one, two, or three action items they should consider on the topic we're talking about. Can you give us one, two, three practical considerations for listeners today? Sure. First of all, let's say we're dealing with a retirement sale; I'll talk about it in that context. It's beneficial to learn what your business is worth before you put a strategy in place.
Are there enough proceeds coming off the sale for retirement, for legacy, for charity? Because a business is an annuity. Let's say you're earning a million a year, and you may get a five multiple, a $5 million exit. But if you need $7 million, it's simple math: run it two more years and then sell, if nothing else changes, and you've put $7 million in rather than harvesting immature fruit. So that would be my first piece of advice.
Hey, Greg, let me interject. Let's give three action steps specifically about selling in stealth mode: how to market a business without alerting customers, vendors, or employees. Sure. Staying on that specific topic, first of all, have good legal documentation, which I talked about: non-disclosure and non-solicitation agreements. Second, vet your buyers, as I touched on before. Make sure they have the chips and the intent to complete the transaction.
There's no reason to start a game you can't win. And then be strategic about sharing information with parties at the proper time. Yeah. So number one, as you mentioned, non-disclosure and non-solicitation: you're referring to those restrictive covenant documents with employees, right? And with potential buyers?
Yes, more with the potential buyers, but having good agreements in place with employees is important. Non-competes with employees are also important, though different states have different levels of enforceability. Yeah. On your number three suggestion, have a strategy: would you agree that the strategy for one seller may look somewhat different than the strategy for another? 100%. If you're selling to the next generation of ownership in a family business, your disclosure issues are greatly mitigated if that family member has worked 20 years for the company, everyone knows them, and the succession is planned, versus an external sale.
It's night and day. Very good. Walter, any last questions from you before we wrap up? No. Greg, I really appreciate you coming on. This has been very helpful. I'm sure our listeners have learned a lot, and Pat and I have as well. Thank you.
Yeah. So, Greg, is there anything you want to promote today? And if listeners want to reach out to you, how can they get in touch? Certainly. The best way to reach me is through our website, which is ibainc.com. My mother was a schoolteacher, and one reason I'm doing this podcast is that I believe in education.
Two elements of our website I would direct you to: first, our blog, which publishes content two to three times a week and has had 200 authors in its history, on all elements related to buying and selling a business and entrepreneurship, so you can gain a lot of education there. And second, our video page, which posts corporate videos and the podcasts and interviews we've been on. I believe the best decisions are made from a foundation of knowledge. And people can always call me at my corporate headquarters at 425-454-3052. Fantastic.
Thanks again, Greg. And listeners, if you want help maximizing and protecting the value of your business or planning for that eventual and inevitable exit, you can reach Walter and me through our website at ennislp.com. We'd also encourage you, if you're attempting to DIY your plan, possibly using AI, to check out our new ExitReadiness® DIY™ platform at exitreadiness.com. We built it specifically for the owner who wants to start to plan themselves and maybe use AI, but also wants a proven framework built by Certified Exit Planners and periodic access to a Certified Exit Planning Professional. Check it out at exitreadiness.com.
And as always, thank you for listening, and if you've benefited from today's episode, please consider liking it and sharing it on social media. We're always grateful for that. Until next time on the ExitReadiness® PODCAST, this is Pat Ennis and Walter Deyhle signing off.
