Broker Hoops

June 11, 2021

by a searcher in Austin, TX, USA

Hi all, I'm fairly new to search and after deciding to move my family from St. Louis to Austin, have recently starting looking for opportunities around Austin metro. I'm looking at various industries and businesses in the $400 - $700,000 SDE range.

Along with other deal sourcing, I scrape bizbuysell daily hoping to find anything that looks promising. I know it's mostly junk, but if not for COVID, I would have closed on a great business that I stumbled upon there. I'm not sure if it's the overall glut of buyers in the market or if it's specific to Austin but I am having a helluva time getting any cooperation from brokers on public listings.

After signing NDAs, I'm still getting a lot of pushback and excessive prequalification requirements from the brokers on revealing the names of the businesses let alone financials or a CIM. Here's a paraphrased version of the latest one that came 2 weeks after I signed the NDA, made several phone calls and sent several emails. This is for a liquor store that has an asking price of $1,600,000 including inventory and only $400,000 of SDE.

- Proof of funds, 50% of listed price
- Pre-approval letter from THEIR SBA lender
- Name of the business will only be revealed AFTER a prescreened call with the seller
- NO EXCEPTIONS

I'm finding this type of posture to be more the norm than the exception. I can't imagine there are that many legitimate buyers willing to dance just for the opportunity to vastly overpay for an single location commodity retail business. Would you guys pursue deals like this? What are some of the strategies that you use to help mitigate all of the potential for wasted time and energy?

Reply by a searcher
from University of California, Berkeley in Bend, OR, USA

A broker told me recently that he gets 60+ inquiries on decent looking listings (and that was in a small town). That's a lot of inquiries to sift through and it makes sense to screen them a bit to weed out the time wasters. The experience you detailed about the liquor store seems excessive, but maybe it has something to do with the types of buyers in that sector as well. Hopefully the experience gets better for you going forward!

Reply by an intermediary
from Northeastern University in Boston, MA, USA

Brokers eat what they kill. Harsh but true. Common industry knowledge tells us that most listings are 20% overpriced and that 80% of listings never sell. (Got that from the CEO of one of the largest franchise brokers). So for most brokers, sellers rule all. Don’t get me wrong, many brokers work really hard, are good honest people, but they have little time for owner’s goals beyond the price. Buyer beware.

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