What Is a Proprietary Search for a Business?
Some of the best deals never make it to the public market. That’s the power of a proprietary search, where buyers reach out directly to business owners to explore opportunities that aren’t listed anywhere. It’s a direct, relationship-driven strategy that often uncovers businesses before they’re publicly listed.
Here’s what sets this approach apart from traditional business listings.
How Do Proprietary Searches Work?
A proprietary search occurs when a buyer — often a searcher or search fund entrepreneur — contacts small business owners who aren’t actively selling. Instead of browsing listings, they identify potential targets that match their search criteria, such as industry, location, or EBITDA range.
This type of deal sourcing relies on research and consistent outreach. Buyers might use tools like LinkedIn or a CRM to organize contacts and track follow-ups. They often send personalized emails, make cold calls, or mail letters to introduce themselves and express interest in a possible acquisition.
Over time, this structured search process helps buyers build a pipeline of proprietary deals, like off-market opportunities that no one else is competing for.
While it can feel flattering to receive this kind of direct outreach, sellers should remember that buyer interest doesn’t always translate to the best business valuation or timing for a sale.
Benefits for Buyers
Buyers often conduct proprietary searches to gain advantages that are not typically available on the open market. Key benefits include:
- Access to less competitive opportunities. Buyers often reach out to SMB owners directly to find businesses that aren’t listed publicly. There’s usually little to no competition, giving them a better chance to negotiate favorable terms.
- Potential for better deal terms and pricing. Proprietary deals allow buyers to structure agreements more creatively, securing better pricing or flexible terms than in competitive auctions. With fewer bidders, sellers may also consider earnouts tied to performance metrics.
- Developing direct relationships with owners. Direct outreach helps buyers build trust and rapport with sellers. It also gives them insights into operations and management practices. Early relationships can reveal hidden opportunities, like off-balance-sheet assets or long-term customer contracts.
- Opportunity to acquire businesses before they hit the open market. Being first to approach a small business gives buyers a strategic advantage. They can secure potential acquisitions before competitors enter the process, often at a lower multiple.
Risks and Considerations for Sellers
When a small business owner receives an unsolicited offer, it can seem exciting. It’s best to proceed with caution because these offers often come with hidden risks.
Buyers may present a valuation before the business is fully prepared for sale. Sometimes sellers might overlook or miss improvements that could increase the multiple.
Confidentiality is another concern. Sharing sensitive information too early can expose the business before a clear deal is in place.
Some small business owners also settle for less because their company wasn’t listed or marketed. They are missing out on competing offers that could drive up value. Even if an offer seems attractive, proper due diligence and professional guidance are essential to understand terms, tax implications, and contractual obligations.
Knowing how to respond to unsolicited offers makes a difference. Sellers can acknowledge interest, ask for time to review, and talk to business brokers before committing. This approach helps keep options open while exploring whether it would be better to list on a marketplace or engage multiple buyers.
Best Practices for Buyers Conducting a Proprietary Search
Running a proprietary search takes consistency, professionalism, and trust. Successful buyers treat every outreach like the start of a relationship, not just a transaction.
- Write a compelling message. A thoughtful introduction can make or break your response rates. Focus on clarity, professionalism, and the reason for your outreach.
- Respect owner privacy and confidentiality. Business owners are often cautious about sharing information. Be upfront about confidentiality and, when appropriate, offer to sign an NDA early in the sourcing process to build trust and credibility.
- Clearly communicate your intentions and process. Explain your background, acquisition goals, and general timeline. Sellers appreciate honesty about funding sources, lenders, and deal structure.
- Assemble the right team. Even in off-market lead generation, a solid support network matters. Engage a buyer’s broker, accountant, finance partner, and attorney to help assess target companies, evaluate risk, and optimize negotiations.
Best Practices for Sellers Receiving Unsolicited Offers
Receiving an unsolicited offer can seem like a big compliment, but it’s important to stay objective, protect your interests, and make informed decisions from the start.
- Assess the buyer’s intent. Start by learning who the buyer is and why they’re interested. Genuine strategic buyers tend to have a specific reason for making the offer and a defined timeline. Opportunistic buyers who are just testing the waters are usually more vague.
- Assemble a team for valuation expertise. Work with experts who know your industry and can benchmark fair value. A proper valuation gives you confidence in negotiations and helps avoid leaving money on the table.
- Consider your exit strategy options. An unsolicited offer can be tempting, but it’s worth revisiting your broader goals. Whether it’s a full sale, partial exit, or partnership, make sure the outcome supports your long-term objectives.
- Negotiate with clarity and patience. Once you decide to engage, set clear terms for information sharing, confidentiality, and timelines. With professional guidance, you can manage the process smoothly and stay in control during negotiations.
Deal Structure and Due Diligence in Proprietary Searches
Once a buyer identifies a business through a proprietary search, the real work begins: structuring the deal and completing due diligence. Most transactions are structured as either asset or stock sales. Asset sales give buyers flexibility to choose what they acquire, while stock sales preserve continuity, which is often preferred in tightly regulated or relationship-driven industries.
Thorough due diligence is critical. Even in off-market opportunities, buyers need to verify financials, assess risks, and confirm the business can deliver the expected return. For first-time buyers, having a defined process helps maintain deal flow and avoid surprises later.
Proprietary deals give buyers early access to acquisition targets. However, sellers who want maximum visibility and stronger pricing often take a different route. Listing on marketplaces like BizBuySell helps attract broader attention and more competitive offers.
Thinking about selling your business? List on BizBuySell to reach the largest network of qualified buyers and maximize your exit strategy with confidence.