No one likes to talk about deeply personal things with strangers – like how much money you make or exactly where you live. Guess what? If you really want to buy a business you are going to have to get comfortable sharing information just like this with the other parties in your business transaction.
What do we mean?
Well, for starters you are going to have to give your real physical address and full name to a business broker before they are going to let you sign a non-disclosure agreement for a particular business listing. They need this information because it ensures that you are who you say you are and you can be individually identified. For instance, there might be 10 John Smiths living in your area, but only one John Smith lives at 123 Marigold Way.
Next, a business broker is likely going to ask for proof of financials to prove to the seller, whoever is financing your transaction (the seller if your deal includes seller financing, the SBA if your loan is through their program, etc.) and your future commercial landlord/property manager that you indeed have the money that you say you do and that you can successfully purchase the business.
That same group might also want to know your work history, education and practical experience. A commercial landlord isn’t likely to let a new tenant sign a long term lease if they have no actual experience in that particular industry. The rent won’t get paid if you don’t know what you’re doing so they want a tenant who is more likely to succeed than fail. A seller also wants to know that they are handing over their business and employees to someone who knows how to keep the business going and keep everyone employed.
See a trend? You are going to have to get comfortable sharing this type of information about yourself. There’s no way around it. When you share your information you gain access to far more from the other side. You get access to confidential, proprietary and potentially damaging information about a business, you get to go through any and all documentation the business has, you get access to tax returns, contracts, employee files – the list is long. What you are given versus what you give is most certainly slanted in a buyer’s favor.
The message here is business deals are complex and a lot of money changes hands. You are going to need to be upfront and forthcoming with information about yourself if you expect the other side to be upfront and forthcoming with the information you need too.
Are you thinking about buying a business and aren’t super comfortable giving up personal information to gain access to listed business information? Would you like to know more about what business brokers, sellers and landlords do with that information? Ask us! Leave any questions or comments and we would be happy to help.