Red flags and green flags when a buyer approaches you
How to tell a serious, trustworthy buyer from a time-waster or worse. What to watch for, and what good buyers do without being asked.
By Unsolicited approaches to business owners have become common. Some are genuine buyers, some are brokers fishing for listings and a few are simply collecting information. A few simple checks help you tell the difference early and protect your time and your business.
Red flag: you can't tell who the buyer is
If the person contacting you won't say who the actual buyer is, or refers vaguely to a group of investors, be careful. You should know who you'd be selling to before you share anything meaningful.
Red flag: a big number before any information
A buyer who promises an impressive price before seeing reliable figures is either guessing or trying to lock you in. Serious buyers explain that any number depends on what they learn.
Red flag: pressure and exclusivity too early
Be wary of deadlines, pressure to sign quickly or requests for exclusivity before key terms and funding are clear. Good deals rarely need to be rushed.
Red flag: asking for sensitive details straight away
Customer lists, staff details and full financials don't belong in a first conversation. If someone wants them immediately, slow down.
Green flags: what good buyers do
They tell you exactly who they are and give you ways to verify it. They explain how they'd fund the purchase.
They're happy to sign your confidentiality agreement. They encourage you to involve your accountant and solicitor.
They explain how any number was reached. And they're comfortable with you saying no.
How to check
Look up the buyer's business name and ABN on the Australian Business Register, check their website and LinkedIn, and call them on a number you found yourself. Ask your accountant or solicitor if anything feels off.
Your checklist
What to do next
- Confirm who the actual buyer is
- Verify their details independently
- Ask how the purchase would be funded
- Don't share sensitive details early
- Avoid early exclusivity
- Involve your advisers
Example
An HVAC owner received two approaches in a month. One caller wouldn't name the buyer and pushed for financials. The other named himself, explained his funding plans and suggested the owner's accountant join the second meeting. The owner only continued with the second.
An illustrative example, not a real client or transaction.
Questions owners ask
Are unsolicited approaches usually scams?+
Most aren't, but some are brokers seeking listings rather than buyers. It's reasonable to ask directly.
How do I verify a buyer?+
Check their business on the Australian Business Register, look at their website and professional profiles, and contact them through details you find yourself.
Can I check Velaro?+
Please do. Our contact details are on this website, and you can ask to meet in person before sharing anything.
Important
This article is general information only. It doesn't take your personal circumstances into account and isn't financial, legal, tax, employment or valuation advice. Velaro Group is a buyer of businesses. It isn't a business broker, licensed financial adviser, registered tax agent or law firm, and it doesn't act for sellers. Please get advice from your own accountant, solicitor or financial adviser before making any decision. Read the full disclaimer.
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