The process of buying and selling businesses can be a bit frustrating. There are rules and procedures in place that ensure the for-sale status and proprietary information of a business on the market only ends up in the hands of the people it should. Those rules and procedures rely on vetting potential buyers and then having buyers who are qualified sign the appropriate nondisclosure agreements (NDAs).
Here’s how it typically should look. A buyer calls a business broker and has a conversation about their goals for business ownership, the capital they have ready to invest and their past experience. The broker then uses that information to put together a few listings that look like they might match. If a listing or two catches the buyer’s eye, they sign the NDA for that business in order to find out more (like the location, basic financials, etc.). If they like what they see, they will then coordinate a conference call or face to face meeting with the business seller to ask questions. After a few of these meetings/calls a site visit might be scheduled before or after hours when the staff and customers won’t be around. If a buyer is interested they can submit a purchase offer and negotiations can begin.
Notice something? The sale of a business is complicated, requires a lot of steps and a lot of time. If the brokers involved are doing their job the buyers who enter this complex and time consuming process are both aware of what they’re looking for and actually able to buy the business in the end.
Here’s what you don’t want. A broker who will send you dozens of NDAs to sign without ever speaking to you, meaning you end up wasting your time looking at businesses that would never meet your goals. A broker who will bring a parade buyers through your business for site visits that could never afford to actually buy your business. A broker who will entertain the whims of a buyer who doesn’t have the practical experience necessary to qualify for a SBA loan or that your commercial landlord would immediately reject.
A broker who asks the right questions keeps a deal on track and keeps from wasting everyone’s time. You want a broker who actually talks to buyers. You want to be (if you’re a buyer) and want to work with (if you’re a seller) a buyer who understands the process, knows what businesses will actually fit with their goals and has the money necessary to get a deal to closing.
The message here is you need to ask any broker you work with questions and you need to keep an eye out for red flags. If you’re a buyer a broker should be asking you LOTS of questions before they send you any NDA. If you’re a seller your broker should only be bringing you buyers who are qualified and would be successful future owners of your business.
Are you looking at businesses to buy and haven’t had a broker yet who asked you a single question? Are you considering selling your business and want to know what type of buyer would be a good for your business? Ask us! Leave any questions or comments and we would be happy to help.