Buying a Business is NOT like Playing Poker

You need to show your cards!

Buyers, when inquiring about a business, remember that you are asking for confidential information. Even the fact that the business is for sale is confidential and the premature exposure of the sale could damage the business and its owner. You of course will want to know the name, address, financial performance information, rental rates, etc. This information is not available to the general public, so the seller or their broker will want you to sign a non-disclosure agreement, plus know more about you prior to releasing that information.

Our firm, plus most other professional business brokerage offices, will want to at least have some basic contact information, know a little bit about your background, and have some representation from you that you have the financial capacity to complete the transaction.  Most of the time with small businesses, this doesn’t mean providing your tax returns or bank statements, but rather just a signed buyer profile stating that you have a certain amount of money to work with. This seems like a fair request given the information that will be provided by the seller. Of course, for larger businesses, both the broker and the Seller will want to know more details about how you propose to acquire the business.

What happens if you fill out the NDA with your address listed as the local UPS Store, no telephone number, and a Gmail address that is Vikingking@yahoo.com? The Seller or the Broker has no way to know who you really are and are very likely to not provide you with the information. Same for the financial representation. A bunch of zeros or N/A’s inserted on the buyer profile doesn’t exactly provide comfort to the Seller and again, will likely result in no response from the Seller or the Broker.

Now, I certainly understand a buyer’s reluctance to provide their financial information if the advertisement is vague and has no financial information.  I too would be irritated if I saw an ad for a “Service Company” asking $500,000, with no revenues or earnings listed, and no other description. Besides the fact that I would never have inquired about such a vague ad, to begin with, I certainly wouldn’t want to provide detailed information about myself not knowing even the type of business or if it’s profitable. But if by the ad you can determine its likely a fit, then it’s time to “show your cards,” or at least enough of them to show that you have a hand that can play in this game.