Yes, Most Business Brokers Hate Self-Funded Searchers...

June 01, 2023

by a professional in Tampa, FL, USA

Most business brokers hate self-funded searchers.

(and rightly so!)

But when approached correctly, you can create a powerful symbiotic relationship

First, why do most business brokers hate self-funded searchers?

Long story short, most are tire kickers who'll never close on a deal.

Specifically, most self-funded searchers:

Lack the funds to close

Present SBA financing risks

Consume more of biz brokers' time

Have historically lower closing success rates

Add unnecessary deal complexity via DD and negotiations

You'd probably hate working with this person too (especially when your pay depends on closing a deal!)

So how can a self-funded searcher buck this reputation?

Refine your deal criteria, elevator pitch, and deal financing

Know how you'll fund a deal

Clearly define your deal "strike zone"

Know why you're a valuable potential buyer

Begin with a specific deal

Introduce yourself in context

Have a short initial question list

Keep your pitch concise & focused

Focus on providing value, not being likeable

Provide candid feedback

Review deal material + respond quickly

Ask additional questions minimally & unobtrusively

And if the deal isn't for you, clearly tell them why, and try to refer them to other potential buyers

Best case scenario: it's your perfect deal, and you quickly close.

Worst case scenario: you pass, but the broker now knows what you're looking for, and if your potential reference closes on the deal you scored major brownie points for future deals.

Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA

^redacted‌, very well written. I just completed a transaction with a search funder on this site. I will give a little background that includes several nuggets of advice when working with brokers. I met the search funder when he sat in on a webinar I gave. The webinar was titled “Buying Businesses in Florida - Why it is Different”. He obviously took notes and was well prepared when he first contacted me to help him find a business. The first thing he did correctly was prepare a professional document introducing himself. The document included his financial statement, a prequalification letter from an SBA lender, a resume, and the type of businesses he was interested in purchasing and why. It demonstrated he was serious, prepared, and know his own abilities. Second, once we found a business matching his criteria, he very quickly moved from an LOI to an asset purchase agreement with appropriate contingencies. This provided the seller confidence the buyer was serious in completing a transaction versus just window shopping. Third, he hired professionals to assist him in the due diligence process and his legal reviews. The second set of eyes gave him the confidence he was making a solid acquisition. Fourth, he began every conversation with a set of questions versus demands. This attitude allowed everyone involved in the transaction to support him to get a deal done. This was refreshing versus the “know it all attitude” some search funders come with which generally alienates the seller and the broker. The absolute worst thing a search funder can do is demand that the broker and seller follow the search funder’s process for completing the transaction. The broker and seller have likely already discussed and agreed on how the process will be executed. And, as an experienced broker, I have been involved in over 200 plus transactions for others and myself. I have a pretty good idea on how the process should work. Harvard MBA or guidance from some online course, it is highly unlikely you have the experience the broker has in successfully guiding deals to the finish line. Make listening a key element of your process.

Reply by an intermediary
from University of Colorado at Boulder in Boulder, CO, USA

Well, first off we don't hate. But we do have to qualify buyers. And buyers have to be prepared to move at the speed of the transaction, keeping pace with other buyer candidates. If you can't keep up, you get dropped. That means you have to be ready for any specific business. Being ready means that you are able to demonstrate to the broker that you are a viable candidate. The most important components of that are pre-approved financing (including working capital), relevant industry or transferable experience, and willingness to relocate as needed. That's the price of admission to meet the seller. Once that happens buyers should know there will likely be multiple offers to compete with. If a business is priced by a qualified professional broker it is likely to represent its true value in the marketplace. Search Funders tend to want to overly analyze and dissect every bit of information and then offer something much lower than the price. It's understandable, but won't get you anywhere since it is always the market of potential buyers that determines the price. Sometimes it takes Search Funders 4-5 deal "losses" on businesses they would like to have acquired to understand that they need to step up to the plate. Buying a business entails risk, if you're not ready for that........

+32 more replies.

Join the discussion