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Do’s and Do Not’s: A Buyer’s Guide to Working with a Business Broker

In the search for the perfect business acquisition, it can almost be guaranteed that you will be in contact with a business and M&A broker.  A broker is a seller’s first line of defense against unqualified buyers.

The impression you make on an intermediary will undoubtedly influence their opinion and recommendations to their client. In some cases, this impression can make or break your chances of purchasing the business!  Here are some general tips for what to do and what NOT to do while communicating with a business and M&A broker.

 

Regarding Sensitive Information

Do Not - Demand sensitive information before signing any type of nondisclosure agreement.

 

The Business Brokers, LLC. and The Business Brokers, Inc. require a signed NDA at the very least before sharing information about our client companies.  Our clients have provided us with plenty of sensitive documents and numbers; it cannot be released to just anyone without proper care for its protection.

When a first-time inquirer demands a company’s name, location, or financial details before signing any agreement, a red flag goes up in the broker’s mind.

You are not entitled to a seller’s sensitive information, especially if you have not signed any non-disclosure agreements. There are some cases where the location is important enough to determine a buyer’s interest from the get-go, but it is ultimately up to the seller and broker as to how much can be shared before an NDA is signed.

Understand that information will be asked of you before details can be shared, and if you do not provide it you will simply not be given any chance of pursuing the business.

First impressions and introductions are important

Do - Be forthcoming with information. While an NDA is generally the minimum requirement to learn more about a business, it is in your best interest to provide more than the basics. A business broker wants to provide his or her clients with quality buyers, and a signed NDA with only a name and address does not always tell the full story.

First impressions and introductions are important! Provide your information, industry experience, and your reason for pursuing the business even if it is not asked. This will give the business broker (and by extension, the seller) a better idea of who you are and how good of a fit you may be for the business.

In addition, inquirers who are prepared to eagerly share from the get-go will be able to walk through the process with much more ease and speed than those that remain secretive. Buying a business is a constant process of shared information from both the buyer and the seller, so cooperation and proactivity in this aspect is a huge advantage.

Integrity is always your best policy

Do Not - Attempt to circumvent the intermediary by contacting the client directly. This is the absolute quickest way to land yourself on a business broker’s blacklist. In almost all cases, the sale of a manufacturing business is highly private, with not even the employees aware of the sale. The change in ownership is often not made public because of the importance of a smooth transition with suppliers and customers.

Contacting a seller directly risks exposure to the sale and could cause irreparable damage to the company. This not only destroys your trust with the seller and the broker, but it is also a breach of the non-disclosure agreement, a binding legal document. You will not have a future opportunity to work with the broker.

Being inquisitive at this stage is a good thing

Do - Ask lots of questions. When pursuing a business, you will be given an overview of the company’s operations and capabilities. However, this is only the tip of the iceberg in terms of the information you will need to know if you decide to buy.

Here at The Business Brokers, LLC. and The Business Brokers, Inc., we are big believers in “pre-due diligence”—asking any questions you can think of before committing to purchase. Once you have signed an NDA and provided evidence of your qualifications as a buyer, you are encouraged to ask anything you think you need to know!

Of course, some information may be withheld until the due diligence phase for the protection of the seller, but there is plenty you can learn about a company’s fit for you without digging into that level of information. Asking questions shows that you are fully invested in the future of the company and aware of the impact it will have on your own future.

Do not be afraid to ask about the business, financing, or the process. This could be the largest transaction of your life, so make sure you know what you are signing up for!

Know when to move on to the next deal

Do Not - Pursue a company without a serious interest in it.  If you have determined beyond a doubt that a company is not the right fit for you, do not continue to pursue it. This may seem like a no-brainer, but it can be tempting to follow the process through just to give it a try. This is a waste of time for you, the broker, and the seller.

Instead, consider continuing your search elsewhere and joining the broker’s alerts for future businesses that match your criteria. A business broker will always give you a hand in the steps for buying, so only pursue a business that you are truly interested in owning. If you are curious about the process but not interested in the business itself, simply ask the broker!

A positive impression can go a long way!

Do Actively convey enthusiasm for the business. Sellers are often presented with multiple buyers’ offers at the same time. However, it is not always a numbers game! In the case of similar offers, the seller will lean towards the buyer most suited to the business - Your eagerness and genuine interest in the company could be all it takes to set you apart from similar offers! Especially in the manufacturing sector, business owners are entrepreneurs that have built their business from nothing. They are highly concerned with the company’s future and continuity.

The peace of heart they feel from selling to someone they trust to take care of their company can sometimes be worth more than the money made from the sale. If you present yourself as financially capable, experienced, and enthusiastic, you will be at the top of the business broker’s and seller’s mind.

Ask questions, show respect for the owners, and show concern for the business and its future. As much of this communication is done through the intermediary, make sure you continue to be pleasant and enthusiastic throughout the process. A positive impression can go a long way!

As always please leave a comment below about business broker stories you have that would be of benefit to others getting ready to purchase their first business.

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The Business Brokers, Inc.
CALIFORNIA MAIN OFFICE

4533 MacArthur Boulevard  
Suite #A5070
Newport Beach, CA 92660


Phone: 661-347-6985
Fax: 800-319-5933

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The Business Brokers, LLC.
NEVADA MAIN OFFICE

2850 W Horizon Ridge Parkway

Suite 200

Henderson, Nevada 89052


Phone: 702-802-8090
Cell: 702-803-0155

Fax: 800-319-5933

We also have office locations in:
Santa Clara, CA., San Diego, CA. Los Angeles, CA.,
Sacramento, CA., Chico, CA. Carlsbad, CA., Reno, NV., Las Vegas, NV. 
 

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John Prudhont, MBA, and Eileen Prudhont, Principals, M&A Business and Real Estate Brokers. Over 40 years combined experience in the sale of Businesses, Commercial, Investment, and Luxury Residential Real Estate.  Experts in Business Brokerage and Mergers and Acquisitions Nationally.

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Eileen Prudhont and John Prudhont are Licensed by the Nevada Department of Real Estate. Nevada Real Estate Broker Licenses:

#1001931 and #1001930. and are performing services for which a Real Estate License is required.

 

Eileen Prudhont and John Prudhont are Licensed by the Nevada Department of Real Estate. Nevada Business Broker Permit

# BUSB.0006958.BKR and BUSB.0006956.BKR. and are performing services for which a Business Broker Permit is required.

Eileen Prudhont and John Prudhont are Licensed by the California Department of Real Estate. Broker License #01307577

and #01178776 and are performing services for which a Real Estate License is required.

© 2022 by The Business Brokers, LLC.

Best-Beaches-in-Orange-County-CA-FTR.jpg

The Business Brokers, Inc.
CALIFORNIA MAIN OFFICE

4533 MacArthur Boulevard  
Suite #A5070
Newport Beach, CA 92660


Phone: 661-347-6985
Fax: 800-319-5933

TBB LLS LOGO SQUARE_edited.png

The Business Brokers, LLC.
NEVADA MAIN OFFICE

2850 W Horizon Ridge Parkway

Suite 200

Henderson, Nevada 89052


Phone: 702-802-8090
Cell: 702-803-0155

Fax: 800-319-5933

We also have office locations in:

Santa Clara, CA., San Diego, CA., Los Angeles, CA.,
Sacramento, CA., Chico, CA., Carlsbad, CA.,
Reno, NV., Las Vegas, NV., Summerlin, NV. 
 

ccim_institute_edited.png

John Prudhont, MBA, and Eileen Prudhont, Principals, M&A Business and Real Estate Brokers. Over 40 years combined experience in the sale of Businesses, Commercial, Investment, and Luxury Residential Real Estate.  Experts in Business Brokerage and Mergers and Acquisitions Nationally.

cabb-logo_old_updated_A_SMALL_icon_only.png
IBBA-nobox-final-2.jpg
  • Pinterest
  • Instagram
  • Facebook
  • Twitter
  • LinkedIn
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