Confidentiality is crucial during the sale process of any business. Carwashes are no exception. The last thing a carwash owner wants, after spending a large portion of their life building their business, is for everything to become public knowledge or to risk what they have built.
The most frequented question from carwash owners considering selling their washes is what information should be shared with the buyer (or buyers). The underlying concern that is the root to this question is well warranted, but this is arguably the wrong question to be asking. The key to protecting everything you have built is not so much what information you share, but rather who to share any information with at all.
Risks of Sharing Info
To understand why the who is more important than the what, discussion must be had on the genesis and crux of confidentiality concerns and information sharing risks. And although several risks exist, they are far from equal in likelihood and potential impact, and they can all be quelled to a point of nonconcern if proper precautions are taken during a sales process.
Largest Risk - Awareness
The single largest risk of selling your carwash is oddly enough the simplest and most surface level of them all; that people become merely aware it’s for sale. Not your gross profit. Not how many Plus Level memberships you signed on last month. None of the specifics. The largest potential downside to a carwash owner that can result from a sales process is people becoming generally aware it’s for sale at all. It becoming common knowledge, or even somewhat known, can easily lead to the wrong people becoming aware; your team and employees.
It’s the nightmare scenario; picking up a phone call from your manager only to have him ask if you’re selling your carwash and asking what’s going to happen to him. Or even worse yet, your manager and employees find out but don’t even tell or address you about it. All of sudden everyone seems to be a tad glummer at work, they stop trying so hard, stop caring like they used to. And how could you blame them. Your dedicated team has now been made aware that there may be an impending changing of the guard of their faithful leader. Goodness, they don’t even know if they will have a job after it’s all said and done.
In most situations, this, simple awareness, is the unequivocal largest risk to an owner considering selling their carwash. And this risk of general awareness is irrespective of the granularity level to which information has been conveyed or shared. The degree of information and granularity to which a prospective buyer or party is privy, has no direct impact on awareness. Therefore, the vast majority of confidentiality-related risk is introduced upon the simple conveyance that a carwash is for sale, not when the detailed “other deductions” pages from your 2017 tax return is shared for a buyers loan approval.
In knowing where the lion’s share of potential downside lies, the question becomes how to best mitigate said awareness risk. There are two options; either share nothing, or be more selective, careful, and methodical in choosing the counterparties and prospective buyers with whom information is shared. The prior being self-defeating of the primary purpose and goal of potentially selling your wash, if nothing else, makes the latter the clear and resounding answer. The best way to mitigate information risk surrounding the confidentiality of selling your carwash is to focus on who information is shared with, not what information is made available.
Being prudent in deciding on appropriate counterparties is easy enough said, but rarely done. The reason for this is that proper filtration requires a significant and often underestimated time commitment from whomever is playing the “gatekeeper” in the sales process. Whether the owner, a broker, or someone else, whoever it is, spend the time to have a system, a method, and structured approach to qualifying prospective buyers and understanding who they are, their intent and their capability. If you do this, and you don’t cut corners at the earliest and most basic levels of your sales process, you will eradicate the risk of awareness to a point.
Knowing the largest risk is completely unconnected to the “what” part of information sharing, it’s now time to turn some attention towards the lesser risks that do, at least somewhat, connect to the “what” part of information sharing.
Secondary Risk - Wasted Time
Although seemingly mundane, and easily viewed as a pill able to be swallowed, wasted time is not something to underestimate. The downside of this risk, being that of endless hours of painfully detailed, and often irrelevant information requests has the very serious potential to deplete the one resource none of us can reclaim; time.
The solution to mitigate the risk of wasted time is to share the right information at the right time, and to be hyper aware of what is and isn’t relevant to share at certain stages. Before dropping the guillotine down on requests for any information that you would not ask for if you were buying another carwash, understand that you are not the only buyer type, and in many cases, the minority buyer type. You, being a wise, well tenured, and experienced carwash operator know everything to a point a potential first-time owner, or even less experienced carwash owner and operator doesn’t and couldn’t. When deciding on what information to share it’s important to account for specific types of funding sources and their requirements, pro-forma plans, and other more nuanced factors such as the purchaser’s familiarity and experience level. That is not to say that everything should be mind-dumped. Truthfully irrelevant, or more accurately described as inconsequential information requests, should be denied, but in an effort of mitigating this secondary risk of wasted time, not for another more nebulous risk. After all, anything truly inconsequential doesn’t carry much weight anyways. This makes the incremental and tangible content risk of such far from meaningful. Knowing how many people work for the company that does the landscaping in front of your wash, although not important (and shouldn’t be shared for the aforementioned risk of wasted-time), this superfluous info also poses no risk by itself in anyone knowing the answer to such.
Many times, it’s not the actual exact information that is or isn’t shared that’s so very important to reducing this secondary risk, but also when to share what level of information. Monthly car counts by package do not, nor should be, shared off the bat. Having different levels to which information is shared at different stages per buyer is crucial no matter the specifics of the carwash sales process at hand. This is true whether you are selling a single car wash via a standard broker approach, or whether you are selling a multi-site car wash company through a traditional M&A Advisory Sellside Process. In general, information should be shared in increments that are prioritized to share as little as possible while weeding out non-starters or the proverbial tire kickers as quickly as possible. No one, the owner, nor any serious buyer for that matter, want’s a sales process to take longer than it must.
By being smart, aware, and knowledgeable as to what information is meaningful at what stage, and what information is not needed at any stage, one can eliminate the risk of a long sales process with ample wasted time all along the way.
Tertiary Risk – Conspiracy Risk
The most contentious of the risks involved with selling your wash is actually the tertiary risk. Although this risk comes accompanied with downside implications easily argued to be as relevant and impactful as those of employee and team awareness, the probability of incurred impact is so low that it sits in third place. This risk is what can be referred to as “conspiracy risk” (and not the tinfoil hat type).
Up until now, none of the risks discussed have had anything to do with how someone could use the specifics of the information shared with them during a diligence period. Unlike the other two risks discussed before, conspiracy risk is exactly that and entirely pertains to how someone could use the specifics of the information (chemical mixes, employee handbook, maintenance procedures, or volumes to the point of reverse proxying into market size and need). The risk here is that someone would use this info to benefit them, while simultaneously being a detriment to you as the current owner.
As grave sounding as it sounds, there is a reason why this is not the primary risk, nor a secondary risk for that matter. The reason why conspiracy risk ranks third overall is because the probability of risk realization is infinitesimally smaller than any other risk involved with selling your carwash. On the most basic level, the number of carwash purchasers who would even know how to exploit specific trade secrets, let alone know what their looking at when staring at an unaltered and non-summarized General Sales Report, are far and few between. This results in a drastically smaller population of capable risk enactors in the way of conspirator risk than either of the other risks that have been discussed. Taking one step further heightens this truth and the implication even more. Of that already thinned population, the proportion of the capable who are willing to partake in the other side of conspiracy risk is yet another small fraction of what is already a fraction. And then, it’s extraordinarily rare that an even capable and willing conspiring counterparty would have the opportunity to tangibly use their gleaned knowledge, despite their capabilities and willingness.
Although small in probability and size, yet still, the magnitude of downside of conspiracy risk is massive if executed on, and for that reason, this type of risk must be combatted as well.
Luckily, the surefire way to completely expel a sales process of this high-magnitude risk is the same solution to solving the primary risk of employee awareness; simply focusing on who information is shared with rather than what information is shared. A little common sense, some googling, a few phone calls and time spent, and heavens forbid a $5 background check when it gets to that phase; these simple steps can ensure that you share info with only the parties you should be.
There is no doubting that selling your carwash introduces risks to you and your business as the current carwash owner and operator. Despite the risks being widespread and potentially catastrophic to you, rest assured that when you take the proper steps, time, and precautions to explore selling correctly, all these risks can be eradicated. It’s not easy, and it takes a time investment, but it’s most certainly doable. The single most important key is to eliminating risk when selling your car wash is to focus on who you share info with, far more so than what information you share.