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Standard procedure to make offer?

I am looking at a small business in my area, and the broker has supplied me with a Purchase and Sale Agreement that he would like me to fill out and return.

He has stated that I am to make an offer prior to seeing any of the financials of the business, and then after the seller has accepted the price, he will provide statements, and if all of his info matches the values he has stated verbally, the sale will commence.

I can't see how I can make any valuation of the existing business if I can't see the financials upfront!

Am I being led down a questionable path, or is this standard procedure?

The broker ad suggests gross sales in the 180k-200k range and the asking price is about 35k, but he will not disclose cash flow figures, which leads me to believe there may be more to this story.

Any comments are appreciated.

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Answers (10)
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phone: (980) 239-7539

Jul 5, 2017
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Ferrari Capital
Hartford County, CT

I would suggest that you avoid making an offer prior to seeing financials. Agree to sign a Non-Disclosure agereeement. Ask to review the financials and take a tour of the business, and then make an offer only if it is a profitable business that you feel comfortable with and it meets your needs/goals. if you review the financials you are interested in moving forward, providing a reasonable earnest money deposit is acceptable.

Jul 1, 2009
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No question , it is a purchase/sale agreement- I downloaded it from his email to me!

I spoke to him again about it, and in addition to the agreement, he is looking for an earnest money deposit, too.
I expressed my concern with this arrangement, and he said it is his practice to operate like this, which again, doesn't make sense to me.

I guess I still have to run this by may legal counsel before going ANY further.

Too much ambiguity at this point, but I do think there is potential in this business, so it may be worth a continued pursuit.

Jul 1, 2009
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How to Buy a Business

Allison, I doubt that there would be any resistance to signing an NDA if that was the issue here. The problem is that some brokers demand signed offers and earnest money long before the buyer even knows if he really wants the business.

Jul 1, 2009
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Maybe he meant non-disclosure agreement? Get it and read it before signing. Agree to sign a confidentiality agreement until you decide on the next step after seeing the financials.

Jul 1, 2009
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Troy and Don,

Thank you both for your time.

I am in CT, by the way.

Now that you have mentioned it, the broker has never suggested I sign a NDA.

I get the very distinct impression from my conversations with him that this is a very motivated seller, and the business has been on the market for some time-I first saw it listed nearly a year ago, and I have been interested because of my personal knowledge of the location.

I have the feeling they are trying to accelerate the sale by going right for the offer.

A non-binding letter of intent sounds like a good idea.
I may run that by the broker to see if it works, after see my attorney.
I've only been in contact with my CPA up to this point regarding this business.

I still have a bit of research to do!

Thanks again, gentlemen.

Jun 30, 2009
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The BAF Group LLC

As gently as I can say this, and as a Business Broker, I'd be damned if I would agree to make an offer without seeing detailed financial documentation. A Non-Disclosure Agreement, yes; and offer - NEVER!

And I would never fill out anything that resembles a Purchase and Sale Agreement without first seeing my attorney. What state are you in, Brian? The practice of Business Brokerage may be subject to license laws that would have some bearing on this practice.

Jun 30, 2009
Troy Frank
VR Business Brokers / Mergers & Acquisit
Premium Broker


This may very well be a good business worth your attention and interest. Some brokers operate in this manner inthe vein of protecting confidentiality, however, you should never submit an offer without first reviewing the financials. Always make sure that you put contingencies in any offer you make. You could place a non-binding Letter on Intent (without earnest money) on the business and see if that would satisfy this broker.

Jun 30, 2009
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Thank you for the response.

My CPA said the same thing.

I am actually familiar with this business(deli) as a past customer.

Over the last ten years or so, I've visited this location maybe 75-100 times, and there is an existing customer base, but my biggest concern is the future.

It has changed hands once or twice over the last 5 years or so, leading me to believe one of two things-either the past and present purchasers don't have the passion to run and grow it, or there is too much commercial/franchised competition to make it a viable opportunity.

There are several eateries in the local area within 1/2 mile or so, which would be my main competition.

I'll have to do some more research into the existing business before pursuing this further.

Thanks again.

Jun 30, 2009
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How to Buy a Business

Short answer: yes, he's trying to manipulate you into buying something you may not want in the end.

Unfortunately, some brokers try to work this way and then act all surprised whenever they hear that they don't have a positive reputation with the public. And I say this as a broker.

If you really want to get the details on the company, insist that a few contingencies be added that create a safe and fast exit for you. Contingent upon your securing satisfactory financing. Contingent upon your adviser's approval. Contingent upon the deal meeting your personal investment criteria. And so on.

"Satisfactory" is whatever you define it as. Your adviser can be anyone who cares about your best interests, including a family member.

Conducting your first due diligence on a small business can take anywhere from a few weeks to two months or more. Heavens only knows what you will dig up on the company in that time frame. While the financials may check out, you may discover that the company is about to be put out of business by a giant competitor opening up shop across the street.

Good luck.

Jun 30, 2009

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