What Not To Do – When Buying a Business

July 31, 2023

High Pricing Perceptions Some businesses may be overpriced. However, quickly judging an appropriately or even aggressively priced business as overpriced will signal to the Broker that you do not have serious intent. In fact, serious buyers seldom overtly express such views, even when they feel a business is overpriced.

Refusal to Share Information If you are interested in a business, be prepared to receive and share confidential and sensitive information. This will likely involve providing details about your background and financial capabilities. Refusal to share such information can lead to premature termination of the conversation.

Refusal to sign Non-Disclosure Agreement (NDA) You will be asked to sign a Non-Disclosure Agreement due to the confidential nature of the information you’re requesting. Our agreement terms are non-negotiable. Exceptions are sometimes made for Private Equity Buyers due to their unique business model. However, NDAs are obligatory for independent buyers.

Rudeness There is absolutely no place for rudeness in these negotiations. Being rude to me, as your broker, indicates to me that you will likely be rude to my seller. I won’t risk my relationship with the business owner by introducing you.

Inconsistent Inquiries If I receive multiple inquiries for businesses that vary in price and Industry, it will likely lead me to question your serious intent.

Disloyalty. While it’s your choice to work with any broker, understand that a broker is likely to dedicate more time and effort to buyers who work exclusively with them.

Identity Concealment Attempts to hide your identity, such as using a fake name, a Google Voice number, insisting on email-only correspondence, or providing a non-existent home address, will result in information not being shared with you.

Confidentiality Breach Any breach of confidentiality will immediately sever our working relationship. If your actions result in harm to the business, you may face legal action. Remember, an NDA should be taken very seriously.

Direct Seller Contact or Unauthorized Business Visits Remember that business brokers serve as intermediaries, and you should respect this process by going through us. If a seller wanted direct buyer communication, they wouldn’t have hired a broker. We can arrange a meeting if you wish to meet the seller.

Untimely Inquiries Respect that time is a valuable commodity for all parties involved. Sellers are busy running their businesses. Hence, avoid making inquiries if you are not ready to make a purchase.

Inadequate Financial Capabilities If you don’t have the necessary funds or means to secure them, it’s best not to seek business opportunities. 100% financing isn’t a feasible option.

Negotiation During Seller Meetings The primary purpose of a seller meeting is for you to gain insights into the business. Avoid negotiating price or terms during this meeting as it can quickly sour the tone of the meeting.

In Conclusion, Be Respectful. Small business owners pour their heart and soul into their businesses, often regarding them as an extension of themselves. Respect this emotional connection during your interactions with them. I have seen owners refuse to sell to someone who they felt disrespected them. I have also seen owners take a lower offer because they liked the buyer. Being nice can also be rewarding.

Anthony Rigney is the broker and owner of Quorum Business Advisors. He has been helping people buy and sell businesses for over fifteen years.